Causal link between military expenditure and GDP - A study of selected countries

Ramesh Chandra Das, Soumyananda Dinda () and Kamal Ray

International Journal of Development and Conflict, 2015, vol. 5, issue 2, 114-126

Abstract: There has been a great debate for long among the economists and political scientists on the issue of whether there has been any link or causations between GDP and military expenditure of a country. Professor Keynes does not believe on spending on military activities as it is wastage of resources, particularly when there is deficiency of aggregate consumption and investment demands in the economy. The present paper tries to examine whether there are causal link between GDP and military expenditure of randomly selected 20 countries in the world for the period 1988-2013. Applying the concerned time series econometric tools the study reveals that GDP causes military expenditure for seven countries including France, Germany and Italy and military expenditure causes GDP for five countries including USA, Canada, China and India. Bidirectional causalities are observed for Italy and Australia with no way causality observed in six countries including UK and Japan.

Keywords: GDP; military expenditure; unit roots; cointegration; error correction; Granger causality (search for similar items in EconPapers)
Date: 2015
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