Defense Spending and Economic Growth: Some Empirical Evidence from the Arab Gulf Region

Yousif Khalifa Al-Yousif

Defence and Peace Economics, 2002, vol. 13, issue 3, 187-197

Abstract: The present paper investigates the causal relationship between defense spending and economic growth in six Gulf countries for the period 1975-1998. I use Granger-causality test within a multivariate error-correction framework to explore the existence and direction of causality between these two variables. The empirical results indicate that neither growth nor defense can be considered exogenous and that the relationship between them cannot be generalized across countries. Two implications can be derived from these findings. One is the need for more studies, especially from developing countries, using time-series data. The other is that decisions on defense spending should be based on each country's socio-economic circumstances. Given the small sample size, however, caution is advised in considering the above results and their implications as final.

Keywords: Defense Spending; Economic Growth; Macro-economics; Defense Economics; Granger Causality; Theoretical Models; Empirical Models (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (14)

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DOI: 10.1080/10242690210977

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