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A non-linear defence-growth nexus? evidence from the US economy*

Jesus Crespo Cuaresma () and Gerhard Reitschuler ()

Defence and Peace Economics, 2004, vol. 15, issue 1, 71-82

Abstract: The defense-growth nexus is investigated empirically using time series data for the US and allowing the effect of defense spending on growth to be non-linear. Using recently developed econometric methods involving threshold regressions, evidence of a level-dependent effect of military expenditure on GDP growth is found: the positive externality effect of defense spending prevails for relatively lower levels of defense spending (with respect to the history of defense spending in the US) and reverts its influence for higher levels.

Date: 2004
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Handle: RePEc:taf:defpea:v:15:y:2004:i:1:p:71-82