Modelling Greek-Turkish Rivalry: An Empirical Investigation of Defence Spending Dynamics

Abstract

Three models are used to test the widely held view that there is military rivalry between Greece and Turkey. The modelling is based on the work of McGuire (1977), Desai & Blake (1981) and a vector autoregression specification. Particular attention is paid to appropriate diagnostic tests, the long-run values and Granger causality. Empirical findings provide little corroboration of the view that there is an arms race between Greece and Turkey. Such results should not be entirely surprising. Rivalry can take many other forms, such as periodic exchanges of bellicose rhetoric; economic, political and diplomatic manoeuvering; lobbying within existing alliances; political, historical and cultural propaganda. Given that the statistical evidence provides little support for the view that there is an arms race between Greece and Turkey, there are possibly other explanations for their military expenditures. Therefore, on the empirical side, the most important issue for future research of the determinants of military expenditures in both countries would be the consideration of models that incorporate the impact of various strategic, political and economic factors which may be important determinants of defence spending.

Domestic political and external security determinants of the demand for greek military expenditure

“…A number of papers have empirically investigated whether the hypothesis of a Greek-Turkish arms race can find a modicum of empirical verification. The findings reported by studies, such as Majeski and Jones (1981), Majeski (1985), Georgiou (1990), Stavrinos (1992), Georgiou et al (1996), Kollias and Makrydakis (1997) and Ocal (2002), vary depending on the time period covered and the methodology employed. Unidirectional, bi-directional and no causality between Greek and Turkish military expenditures have been reported.…”

Survey and Review of the Defense Economics Literature on Greece and Turkey: What Have We Learned?

“…On the role of the public sectors in Greece and in Turkey, see Neal and Barbezat, 1998. stantive considerations. For instance, Georgiou, Kapopoulos, and Lazaretou (1996) tested for the presence of a Greco-Turkish arms race rivalry using shares of military expenditure in GDP, whereas Kollias and Makrydakis (1997b) used levels of military expenditures. The former found little evidence of an arms race, the latter found strong evidence of an arms race.…”

“…The US and Germany are, by far, the most prominent arms suppliers to both Turkey and Greece. 8 Majeski (1985), Georgiou (1990), Stavrinos (1992), Georgiou, Kapopoulos, Lazaretou (1996), Kollias and Makrydakis (1997b), and Dunne, Nikolaidou, and Smith (1999). There is an earlier contribution, Majeski and Jones (1981), but its results are included in Majeski (1985).…”

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.…”