The Impact of Worldwide Military Spending Cutson Developing Countries

Steven Symansky, Tamim Bayoumi and Daniel Hewitt

No 1993/086, IMF Working Papers from International Monetary Fund

Abstract: This paper investigates the economic impact of a coordinated reduction in military expenditures of 20 percent using a specially modified version of the MULTIMOD world economic model. Simulation results indicate that in developing countries the present value of consumption increases by 46 percent of 1992 GDP, compared to military expenditures cuts, in present value terms, of 33 percent of 1992 GDP. The gains reflect both the release of domestic resources and a positive international economic externality due to enhanced trade and lower world interest rates. Accordingly, the net debtor developing country gains exceed those of industrial countries. Examination of individual developing country economies confirms the significance of the external trade effect on the pattern and level of gains.

Keywords: WP; military spending; developing country region; Cutson developing countries; government spending; military expenditure; expenditure pattern; arms import; leads to a decrease; b. developing country region; developing country framework; developing country economy; arms export; region of the world; developing countries benefit; Defense spending; Imports; Private consumption; Exports; Real exchange rates; Western Hemisphere; Africa; Eastern Europe (search for similar items in EconPapers)
Pages: 38
Date: 1993-11-01
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Related works:
Journal Article: The Impact of Worldwide Military Spending Cuts on Developing Countries (1998)
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