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Military expenditure, economic growth and structural instability: a case study of South Africa

Goodness C. Aye, Mehmet Balcilar, John Dunne, Rangan Gupta and Renee van Eyden ()

Defence and Peace Economics, 2014, vol. 25, issue 6, 619-633

Abstract: This paper contributes to the growing literature on the milex-growth nexus, by providing a case study of South Africa and considering the possibility of structural breaks by applying newly developed econometric methods. Using full sample bootstrap Granger non-causality tests, no Granger causal link is found between military expenditure and GDP for 1951-2010, but parameter instability tests show the estimated VARs to be unstable. Using a bootstrap rolling window estimation procedure, however, finds evidence of bidirectional Granger causality in various subsamples. This implies standard Granger non-causality tests, which neither account for structural breaks nor time variation may be invalid.

Date: 2014
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Working Paper: Military Expenditure, Economic Growth and Structural Instability: A Case Study of South Africa (2013)
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DOI: 10.1080/10242694.2014.886432

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