Economic growth and military expenditure in the countries on NATOʼs Eastern flank in 1999–2021

Łukasz Olejnik

No wp2023-2, Bank of Estonia Working Papers from Bank of Estonia

Abstract: This paper studies how military expenditure impacted economic growth in nine Central and Eastern European countries in 1999–2021 using a newly created dataset of disaggregated military expenditures. The results of estimating an ARDL growth model with military expenditure confirm that various kinds of military expenditure had a negative and statistically significant influence on economic growth in the longer run, and show that personnel expenditures and labour market adjustments were the most important channel of influence. Equipment purchases and army maintenance also have a negative influence on GDP growth, but that influence is smaller. Fiscal multipliers of military expenditure were estimated using the Local Projections method to measure the short-run effects, and values below unity were obtained. The short-run fiscal multipliers of military expenditure are 0.2–0.5 lower than the fiscal multipliers of non-military government consumption

Keywords: military expenditures; military expenditures and economic growth; fiscal multiplier; fiscal adjustments (search for similar items in EconPapers)
JEL-codes: H56 O11 (search for similar items in EconPapers)
Date: 2023-05-09, Revised 2023-05-09
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