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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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