Nexus between defence spending, economic growth and development: evidence from a disaggregated panel data analysis

Charles Shaaba Saba () and Nicholas Ngepah
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Charles Shaaba Saba: University of Johannesburg

Economic Change and Restructuring, 2022, vol. 55, issue 1, No 4, 109-151

Abstract: Abstract This study investigates the causal effect relationship between defence spending, economic growth and development in three regions for the period 1990–2018. It further estimates the trivariate impacts of defence spending, growth and development in three regions. To measure growth, we used real gross domestic product as the proxy, while economic development was measured by the Human Development Index. The empirical results suggest the existence of a bidirectional long-run relationship between defence spending, economic growth and development in the entire sample and the three regions of sub-Saharan Africa, the Middle East and North Africa, and Latin America and the Caribbean countries. The causality results reveal that there is feedback causality between defence spending, economic growth and development. There is thus a need to promote holistic policies to reduce the defence spending necessary for the enhancement of inclusive economic growth and development in these three regions. A decrease in defence spending in the three regions will encourage aggregate output and the standard of living to increase, and move simultaneously in the same direction.

Keywords: Defence spending; Economic growth and development; Panel cointegration; Panel causality; Panel vector autoregressive (PVAR) (search for similar items in EconPapers)
JEL-codes: C33 H56 O11 O53 O54 O55 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s10644-020-09311-7

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