Defense spending and economic growth across the Taiwan straits: a threshold regression model

Chung-Nang Lai, Bwo-Nung Huang and Chin-Wei Yang

Defence and Peace Economics, 2005, vol. 16, issue 1, 45-57

Abstract: This paper employs both linear and non-linear models to investigate the relationship between national defense spending and economic growth for Taiwan and China. Using data from 1953-2000 on defense spending, GDP, import, export and capital, we find that China's defense spending leads that of Taiwan. There exists the phenomenon of an arms race between both countries when official Chinese data are used. On the one hand, feedback relations prevail between economic growth and defense spending growth in Taiwan. On the other hand, China's national defense is found to lead economic growth.

Keywords: Arms race; Multivariate threshold models; Defense spending; Economic growth (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (36)

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DOI: 10.1080/1024269052000323542

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