Economic Growth Effects of Military Expenditure in the Absence and Presence of Armed Conflicts: The Case of Pakistan and India

Hafsa Shoukat

No em-dp2022-13, Economics Discussion Papers from Department of Economics, University of Reading

Abstract: This paper examines the relationship between military expenditure and economic growth in the absence and presence of armed conflicts (internal and external), in the context of Pakistan and India. We employ an Autoregressive Distributed Lag (ARDL) cointegration method with different diagnostic techniques by using time series data from 1960 to 2019. The empirical findings indicate a positive and significant impact of military expenditure on economic growth in the absence of armed conflicts in the case of Pakistan. The results also suggest that external armed conflicts have a significantly negative effect on economic growth in both contexts, but external armed conflicts are more harmful to the Indian economy as compared to its counterpart. Further, the findings suggest that military expenditure stimulates economic growth in the presence of significantly higher external armed conflicts. However, military expenditure in the absence of armed conflicts has stronger growth-stimulating effects than in the presence of external armed conflicts. This suggests that armed conflicts offset some of the positive economic growth effects of military expenditure.

Keywords: economic growth; military expenditure; external armed conflicts; internal armed conflicts; ARDL; Pakistan; India (search for similar items in EconPapers)
JEL-codes: H56 H57 H59 O10 O11 O40 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2022-12-06
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