The Defense Spending and GDP Nexus in the Middle East: Evidence from Gradual and Nonlinear Structural Shifts

Madhuri Megoti (), Dong-Yop Oh () and Hyejin Lee ()
Additional contact information
Madhuri Megoti: Department of Information Systems, Auburn University at Montgomery, AL 36117, USA,
Dong-Yop Oh: Department of Information Systems, Auburn University at Montgomery, AL 36117, USA,
Hyejin Lee: Department of Accounting, Economics and Finance, Tuskegee University, Tuskegee, AL 36088, USA.

International Journal of Economics and Financial Issues, 2026, vol. 16, issue 2, 133-139

Abstract: This study examines the long-run relationship between defense spending and economic growth in 14 Middle Eastern countries from 1988 to 2023. Using Fourier LM unit root and Fourier ADL cointegration models, we account for gradual and nonlinear structural shifts often missed by conventional tests. Results show that most defense spending and GDP series are non-stationary but cointegrated once smooth breaks are incorporated. Income elasticity estimates reveal wide variation: oil-based economies such as Kuwait maintain rigid defense budgets, while the UAE and Lebanon show disproportionately higher responsiveness. Findings highlight how fiscal capacity and geopolitics shape defense and growth dynamics.

Keywords: Cointegration; Defense Spending; Fourier Approximation; Middle East Countries (search for similar items in EconPapers)
Date: 2026
References: Add references at CitEc
Citations:

Downloads: (external link)
https://econjournals.com/index.php/ijefi/article/download/22251/9985 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eco:journ1:v:16:y:2026:i:2:id:22251

Ordering information: This journal article can be ordered from
https://econjournals.com/index.php/ijefi

DOI: 10.32479/ijefi.22251

Access Statistics for this article

More articles in International Journal of Economics and Financial Issues from International Journal of Economics and Financial Issues
Bibliographic data for series maintained by Monica Sinhat ().