Examining the Nexus Between Military Expenditure and Economic Growth: Evidence from Nigeria

Some countries spend a relatively large percentage of GDP on their militaries in order to preserve or secure their status as global powers. Others do so because they are ruled by military governments or aggressive regimes that pose a military threat to their neighbors or their own populations. It is debatable whether there is a causal relationship between military spending and economic growth in the economy. It is again a policy debate how much to allocate funds for civilian and how much for military expenditure. Under these puzzling results of the impact of military expenditure on economic growth which is frequently found to be non-significant or negative, yet most countries spend a large fraction of their GDP on defense and the military. The chapter tries to investigate the relationship between military spending and economic growth in India. It also sees whether external threats, corruption, and other relevant controls have any causal effect. This chapter obtains that additional expenditure on Indian military in the presence of additional threat is significantly detrimental to growth implying that India cannot afford to fight or demonstrate power at the cost of its development.

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The Relationship Among Military Expenditure, High Technological Product Exports, and Economic Growth

Research Anthology on Military and Defense Applications, Utilization, Education, and Ethics ◽

10.4018/978-1-7998-9029-4.ch034 ◽

2021 ◽

pp. 624-645

Author(s):

Sevgi Sezer

Keyword(s):

Economic Growth ◽

Panel Data Analysis ◽

Military Expenditure ◽

Gdp Per Capita ◽

High Tech ◽

Industrialized Countries ◽

G7 Countries ◽

Causality Relationship ◽

Per Capita ◽

The Relationship

In this chapter, the effects of military expenditure (MEXP) on high-tech exports (HTX) and GDP per capita (GDPPC) of G7 and new industrialized countries (NIC) are analyzed for period 1988-2015 by panel data analysis. The causality relationships between the series are examined by Dumitrescu and Hurlin test. In G7 countries, one-way causality relationship from HTX to MEXP and two-way causality relationship between MEXP and GDPPC have been identified. Also, in NIC countries, two-way causality relationship between HTX and MEXP and one-way causality relationship from GDPPC to MEXP have been determined. Cointegration relations are tested by Pedroni test and the series are found to be cointegrated. It is seen that in the G7 countries, 1% increase in MEXP during the period of 1988-2015 increased HTX by 0.71% and GDPPC by 0.98%. In NIC countries, the 1% increase in MEXP increased HTX by 1.7% and GDPPC by 0.96%. The effect of MEXP on HTX is found much higher in NIC countries.

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New Evidence for Romania Regarding Dynamic Causality between Military Expenditure and Sustainable Economic Growth

Sustainability ◽

10.3390/su12125053 ◽

2020 ◽

Vol 12 (12) ◽

pp. 5053 ◽

Cited By ~ 2

Author(s):

Ran Tao ◽

Oana Ramona Glonț ◽

Zheng-Zheng Li ◽

Oana Ramona Lobonț ◽

Adina Alexandra Guzun

Keyword(s):

Economic Growth ◽

Economic Development ◽

Structural Changes ◽

Private Investment ◽

Military Spending ◽

Military Expenditure ◽

Crowding Out ◽

Annual Growth Rate ◽

Sustainable Economic Development ◽

Sustainable Economic Growth

Military spending and sustainable economic development have been widely discussed in recent decades. Especially in Romania, the defense budget is valued at $4.8 billion, registering a compound annual growth rate (CAGR) of 23.57%. It is also expected to reach $7.6 billion in 2023, according to a report by Strategic Defense Intelligence. There is no consensus in current research and less attention is paid to Eastern European countries. Considering the significant increase in military spending in Romania in recent years, as well as the occurrence of political events, this paper focuses on the dynamic causal relationship between military spending and sustainable economic growth in Romania. The bootstrap rolling window causality test takes into account the structural changes, and therefore, provides more convincing results. The results indicate negative effects of military expenditure on sustainable economic growth between 1996–1999 and 2002–2004. It can be attributed to the crowding-out effect of public expenditure on private investment. The positive effect between the two variables analyzed is noticed with the accession of Romania to the North Atlantic Treaty Organization. Conversely, it is found that economic growth does not have a significant effect on military spending in Romania. Policymakers should guard against the crowding out of private consumption and investment due to excessive military spending and ensure to increase military expenditure on the premise of sustainable economic development.

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