The nexus between defense expenditure and economic growth: New global evidence

Pei-Fen Chen, Chien-Chiang Lee () and Yi-Bin Chiu

Economic Modelling, 2014, vol. 36, issue C, 474-483

Abstract: This paper applies a two-step Generalized Method of Moments (GMM) to re-examine the causality between defense burden (MB) and real GDP (RY) for 137 countries. The findings indicate that a short-run causality running from MB to RY is found in lower-middle- and high-income countries and that from RY to MB is found in low-income countries, while bidirectional short-run causality is found in Asia, Europe, Latin America & the Caribbean and the Middle East & North Africa. No causality is found in upper-middle-income, European & Central Asian and Sub-Saharan African countries. Thus, our results do not support that one size fits all. This paper contributes important implications to the countries for making their defense policy.

Keywords: Defense expenditure; Economic growth; Causality; Dynamic panel; Region (search for similar items in EconPapers)
JEL-codes: C33 H56 O40 O57 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (42)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:36:y:2014:i:c:p:474-483

DOI: 10.1016/j.econmod.2013.10.019

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