Does defence expenditure deter economic growth in Turkey? A cointegration analysis

Abstract

This paper investigates a series of unit root, cointegration and causality tests to ascertain the direction of causality between the growth of GNP and defence expenditure in Turkey for the years 1955-2000. The main conclusion is that there is a long-run equilibrium relationship between GNP and defence expenditures. Furthermore, the short run causality test indicates that there is a unidirectional causality between variables, from defence expenditure to economic growth. In order to see the effect of a shock, we employed impulse response analyses. The results show that GNP decreased during the period then output finally recovered from the initial shock to defence expenditures.Defence, Cointegration, Turkey, JEL codes: C22; C32, H56,

Does Defence Spending Impede Economic Growth? Cointegration and Causality Analysis for Pakistan

“…Moreover, results have indicated negative effect of military spending on economic growth for Pakistan's economy. These findings are consistent with the existing literature such as Khilji and Mahmood (1997), Atesoglu (2002), Karagol and Palaz (2004), Smith and Tuttle (2008), Tang (2008) and Keller et al (2009). The estimated coefficient of government non-military spending is showing positive impact on economic growth supporting the views of Halicioglu (2004), Yildirim et al (2005) and Wijeweera and Webb (2009).…”

“…At this point, we can compare our results with Khilji and Mahmood (1997) who reported inverse impact of military spending on economic growth. Our empirical evidence are in line with the findings by studies such as Atesoglu (2002) for the USA, Karagol and Palaz (2004) for Turkey, Smith and Tuttle (2008) for the USA and Keller et al (2009) for OECD countries who found inverse relationship between defence spending and economic growth. The impact of non-military spending on economic growth is positive and it is statistically significant at 1% level of significance.…”

“…These findings are contradictory to those of Tahir (1995), Khilji and Mahmood (1997) and Khan (2004) for Pakistan who reported bidirectional causality between the variables which may be biased and inconsistent due to different data span used in the studies. However, our empirical evidence is consistent with the existing defence economic literature such as Abu-Bader and Abu-Qarm (2003) for Egypt, Israel and Syria; Karagol and Palaz (2004) and Özsoy (2008) for Turkey; Tang (2008) for Malaysia and Smith and Tuttle (2008) for the USA.…”

“…Military expenditures may also lead to improvements in infrastructure while a similar positive effect is also postulated when it comes to the labour force and the technical skills acquired during military training that can then be useful endowments for the civilian life of soldiers once decommissioned (MacNair et al, 1995). On the other hand, however, there has been ample evidence generated by a plethora of studies pointing to a negative impact on growth using both cross-section as well as time series data-sets in the empirical investigation of the issue at hand (inter alia: Deger and Smith, 1983;Lim, 1983;Faini et al, 1984;Fredericksen and Looney, 1983;Birdi and Dunne, 2002;Karagol and Palaz, 2004;Karagol, 2006;Mylonidis, 2008;Smith and Tuttle, 2008;Pieroni, 2009;Abu-Qarn, 2010).…”

Military expenditure and the economy of Zimbabwe

“…The feedback perspective explains that both government military expenditure and economic growth affect each other. In the long run, both military expenditure and economic growth were found to have influenced each other in Turkey (Karagol and Palaz, 2004). Kollias et al (2007) however discovered that both military spending and economic growth influenced each other in the long run in all the EU15 group of countries.…”