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Asymmetric causality between military expenditures and economic growth in top six defense spenders

Abdulnasser Hatemi-J (), Tsangyao Chang (), Wen-Yi Chen (), Feng-Li Lin () and Rangan Gupta ()
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Wen-Yi Chen: National Taichung University of Science and Technology
Feng-Li Lin: Chaoyang University of Technology

Quality & Quantity: International Journal of Methodology, 2018, vol. 52, issue 3, 1193-1207

Abstract: Abstract This study applies asymmetric causality tests, proposed by Hatemi-J (Asymmetric panel causality tests with an application to the impact of fiscal policy on economic performance in Scandinavia, 2011; Empir Econ 43(1):447–456, 2012), to revisit military expenditures-growth nexus for the world top six defense spenders during the period of 1988–2013. Empirical results indicate that the military expenditure-led hypothesis is supported in China and Japan. However, the growth-led hypothesis is supported in four countries, i.e. France, Russia, Saudi Arabia and US. Except for Saudi Arabia, strong economic growth by no means implies automatic expansion of military expenditures. Defense planning in these countries is a matter of matching their limited resources to attain the suitable priorities. The more threats they perceive, the more spend for defense. This evidence provides useful insight into the behavior of other potential defense suppliers.

Keywords: Growth; Military expenditures; Asymmetric panel causality (search for similar items in EconPapers)
JEL-codes: C33 H56 O40 (search for similar items in EconPapers)
Date: 2018
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