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Military expenditure and economic growth: using causality, cointegration and missing variables

Military expenditure and economic growth: using causality, cointegration and missing variables There is considerable interest in the relationship between military expenditure and economic growth, especially since Benoit's (1973, 1978) seminal work. Most studies of this linkage before our present work use a simple causality test. These results are unreliable or may be flawed, due to missing–variable bias and other limitations. This paper overcomes these deficiencies by deploying dynamic multivariate–causality tests applied to data from 22 countries over the period 1988–2012. Our novel panel–data estimation methods allow for more robust estimates by utilising variation between countries as well as variation over time. We find equilibrium relationships between military expenditure and economic growth and significant causality links deriving uniquely from our innovations. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Computational Economics and Econometrics Inderscience Publishers

Military expenditure and economic growth: using causality, cointegration and missing variables

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Publisher
Inderscience Publishers
Copyright
Copyright © Inderscience Enterprises Ltd. All rights reserved
ISSN
1757-1170
eISSN
1757-1189
DOI
10.1504/IJCEE.2013.058496
Publisher site
See Article on Publisher Site

Abstract

There is considerable interest in the relationship between military expenditure and economic growth, especially since Benoit's (1973, 1978) seminal work. Most studies of this linkage before our present work use a simple causality test. These results are unreliable or may be flawed, due to missing–variable bias and other limitations. This paper overcomes these deficiencies by deploying dynamic multivariate–causality tests applied to data from 22 countries over the period 1988–2012. Our novel panel–data estimation methods allow for more robust estimates by utilising variation between countries as well as variation over time. We find equilibrium relationships between military expenditure and economic growth and significant causality links deriving uniquely from our innovations.

Journal

International Journal of Computational Economics and EconometricsInderscience Publishers

Published: Jan 1, 2013

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