Defence spending and economic growth in South Africa: A supply and demand model

John Dunne, Eftychia Nikolaidou and Andre Roux

Defence and Peace Economics, 2000, vol. 11, issue 4, 573-585

Abstract: This paper provides a contribution to the growing corpus of knowledge and understanding of the interaction between economic growth and defence spending in South Africa by specifying a Keynesian simultaneous equation model and estimating the system for the period 1961 to 1997. The model contains a growth equation, a savings equation, a trade balance equation and a military burden equation and when estimated by single equation and systems estimation methods is relatively well specified. There is evidence of an overall negative effect of military spending on the economy over this period, though the significance of individual coefficients is low. There is certainly no evidence of any positive impact, suggesting that cuts in military spending do present an opportunity for improved macroeconomic performance.

Keywords: South Africa; Defence spending; Economic growth; Simultaneous equation model (SEM); Two Stage Least Squares (2SLS); Three Stage Least Squares (3SLS) (search for similar items in EconPapers)
Date: 2000
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Citations: View citations in EconPapers (13)

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DOI: 10.1080/10430710008404967

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