The nexus between arms imports, military expenditures and economic growth of the top arms importers in the world: a pooled mean group approach

Shreesh Chary

Journal of Economic Studies, 2023, vol. 51, issue 4, 808-822

Abstract: Purpose - This paper explores whether data back the claim that imports of armaments are inherently bad for economic growth. Regardless of one's point of view, the production and trade of weaponry is a significant industry with serious economic implications that warrant investigation. The financial repercussions of military spending have been extensively studied, but the economic effects of arms importation remain unknown. Design/methodology/approach - This study adopts a pooled mean group approach to investigate the nexus between arms imports, military expenditure and per capita GDP for a balanced panel of twenty-five of the top arms importers in the world from 2000 to 2021. Findings - The authors find that arms imports and military spending negatively impact GDP per capita in the short run, but military spending is beneficial over the long run. The authors also used the Dumitrescu Hurlin Granger causality test, which revealed a unidirectional causation between per capita GDP and military expenditure, and a unidirectional causal relationship from military spending to arms imports. Research limitations/implications - This paper is deficient in a few aspects: first, it looks at only those countries comprising the top 70% of arms imports. Second, it omits many political, technological and legal factors that impact arms imports and military expenditures. Originality/value - This paper looks into the impact of defense spending and arms imports on economic growth for twenty-five nations with the highest share of arms imports in recent times. It is a significant addition to the literature as it resolves the debate of whether or not the military expenditure is wasteful and whether arms imports significantly harm the nation's economic growth.

Keywords: Arms imports; Dumitrescu-Hurlin Granger causality; Economic growth; Military expenditure; PMG-ARDL (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jespps:jes-05-2023-0265

DOI: 10.1108/JES-05-2023-0265

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