Defense Expenditures, External Public Debt and Growth in Developing Countries

Abstract

This study reexamines the relationship between growth and defense spending in developing countries. It differs from previous studies as it recognizes differences in the borrowing capacity of each country. We hypothesize that a negative relationship will exist between defense and economic growth in countries which are financially resource constrained, and a positive relationship will exist in countries which are relatively resource unconstrained. A factor and discriminate analysis are used to group countries. The variables chosen for the factor analysis depict a country's external debt, structural condition, growth, and balance of payments position. Regression equations were estimated for the total sample and each group, with the growth in Gross Domestic Product as the dependent variable. The results confirm the hypothesized positive relationship between defense and growth in the unconstrained group, but was not confirmed for the constrained group. The results suggest the importance of variables such as foreign exchange, net inflows of capital, external debt, and the growth of the public sector in general, on economic growth.

Defense Spending and Economic Growth in China, India, Nepal and Pakistan: Evidence from Cointegrated Panel Analysis

“…There are two ways we can see the relationship between defense spending and economic growth: first, regression approach, where the direction of causality does not serious matter and second, time series approach, where the direction of causality does serious matter. A number of research papers have been concerned with the empirical relationship between defense spending and economic growth in different countries over different periods (see Hirnissa et al, 2008;Yildirim and Ocal, 2006;Yildirim et al, 2005;Reitschuler and Loening, 2005;Yildirim et al, 2005;Halicioglu, 2004;Kollias et al, 2004;Ocal, 2003;Shieh et al, 2002;Atesoglu, 2002;Dakurah et al, 2001;Dunne et al, 2001;Stroup and Heckelman, 2001;Frederiksen and McNab, 2001;Kollias and Makrydakis, 2000;Dunne and Vougas, 1999;Georgiou et al, 1996;Nadir, 1993;Chowdhury, 1991;Frederiksen, 1991;Alexander, 1990;Frederiksen and LaCivita, 1987;Looney and Frederiksen, 1986;Joerding, 1986). The empirical findings are, nevertheless, very contradictory.…”

Impacto del gasto de la defensa en el crecimiento económico de Colombia en los últimos veinte años

“…(Benoit, 1978), (Ateşoglu & Mueller, 1990), (Atesoglu, 2004). Un tercer grupo sostiene que la relación entre los gastos de defensa y el crecimiento económico varía, ya que puede ser positivo o negativo, como (Biswas & Ram, 1986), (Looney & Frederiksen, 1986), (Looney, 1988), (Chowdhury, 1991), (Karakul & Palaz, 2004).…”

Defense Expenditures and Economic Performance in South Asia: Tests of Causality and Interdependence

“…Defense Causes Growth. The implicit assumption in a number of earlier studies such as Benoit (1973), Rothschild (1977), Frederiksen and Looney (1983, 1983a, Looney and Frederiksen (1986), Deger and Sen (1983), Leontief andDutchin (1983), andLim (1983) is that defense spending occurs prior to and causes economic growth.…”