Military expenditures and macroeconomic indicators in selected countries of Asia and Africa

Faisal Jamil and Mayira Sabir

World Development Perspectives, 2025, vol. 39, issue C

Abstract: The study examines the impact of fiscal policy by identifying the effect of government military spending on aggregate economic activity. The analysis utilizes panel data from 30 countries spanning the period 2000–2018. We checked the impact of military expenditures on the real effective exchange rate, current account balance, and private consumption. Our sample comprises peaceful and war-ridden countries from the Asian and African continents. The empirical models are estimated separately for Asia and Africa, as well as for countries experiencing both peace and war. The results suggest that military spending shocks have a significant impact on the real exchange rate and current account in peaceful countries. In contrast, the shock has a significant effect on private consumption in war-ridden countries. The military expenditure shock is more detrimental to the current account in Asian countries than in African countries. Military spending is import-based, primarily in developing countries, and is financed through external debt or assistance, which in turn influences exchange rates, private consumption, and the current account balance. For sustained economic growth, the share of military spending needs to be phased out and replaced with civil spending that requires strengthening diplomatic channels and engaging in multilateral trade agreements.

Keywords: Military spending; Asian countries; Africa; Dynamic panel estimator; Security (search for similar items in EconPapers)
JEL-codes: E21 E62 H72 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:wodepe:v:39:y:2025:i:c:s2452292925000724

DOI: 10.1016/j.wdp.2025.100727

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