The spillover effects of military spending across superpowers using the TVP - VAR approach

Duc Hong Vo, Minh Phuoc Bao Tran and Phuong Thi Ha Cao ()
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Duc Hong Vo: Ho Chi Minh City Open University, Ho Chi Minh City, Vietnam
Minh Phuoc Bao Tran: Ho Chi Minh City Open University, Ho Chi Minh City, Vietnam
Phuong Thi Ha Cao: Ho Chi Minh City Open University, Ho Chi Minh City, Vietnam

HO CHI MINH CITY OPEN UNIVERSITY JOURNAL OF SCIENCE - ECONOMICS AND BUSINESS ADMINISTRATION, 2025, vol. 15, issue 1, 38-53

Abstract: The amount of money spent on military activities across superpowers globally has generally caused significant concerns regarding military conflicts, the arms race, economic growth development, security, political stability, and governance. This paper investigates the spillover effects of military spending among the world’s largest spenders on military activities over the period 1997 - 2022. We use the advanced Time-Varying Parameter Vector Autoregressive (TVP-VAR) model to examine these effects, which is not used in the literature on defense economics. Our empirical results indicate the dynamic international spillovers of military spending among eleven countries. We find that the average total dynamic military spending connectedness was at the strongly interrelated level of 83.84 percent, ranging from 89.37 percent to 94.23 percent. Among these eleven, the world's largest spenders on military activities, the USA (China) is the most significant contributor (receiver) of total spillover. At the same time, Australia and Iran transmitted and received the least spillover of military spending.

Keywords: military spending; spillover effects; TVP-VAR based approach (search for similar items in EconPapers)
JEL-codes: H53 H56 H59 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:bjw:econen:v:15:y:2025:i:1:p:38-53

DOI: 10.46223/HCMCOUJS.econ.en.15.1.3062.2025

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