Asymmetric causality between military expenditures and economic growth in top six defense spenders

Abdulnasser Hatemi-J, Tsangyao Chang, Wen Yi Chen, Feng Li Lin, Rangan Gupta

    Research output: Contribution to journalArticlepeer-review

    13 Citations (Scopus)

    Abstract

    This study applies asymmetric causality tests, proposed by Hatemi-J (Asymmetric panel causality tests with an application to the impact of fiscal policy on economic performance in Scandinavia, 2011; Empir Econ 43(1):447–456, 2012), to revisit military expenditures-growth nexus for the world top six defense spenders during the period of 1988–2013. Empirical results indicate that the military expenditure-led hypothesis is supported in China and Japan. However, the growth-led hypothesis is supported in four countries, i.e. France, Russia, Saudi Arabia and US. Except for Saudi Arabia, strong economic growth by no means implies automatic expansion of military expenditures. Defense planning in these countries is a matter of matching their limited resources to attain the suitable priorities. The more threats they perceive, the more spend for defense. This evidence provides useful insight into the behavior of other potential defense suppliers.

    Original languageEnglish
    Pages (from-to)1193-1207
    Number of pages15
    JournalQuality and Quantity
    Volume52
    Issue number3
    DOIs
    Publication statusPublished - May 1 2018

    Keywords

    • Asymmetric panel causality
    • Growth
    • Military expenditures

    ASJC Scopus subject areas

    • Statistics and Probability
    • Social Sciences(all)

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