The nexus between defense expenditure and economic growth: New global evidence |
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| Institution: | 1. Department of International Business Studies, National Chi Nan University, Nantou, Taiwan;2. Department of Finance, National Sun Yat-sen University, Kaohsiung, Taiwan;3. Department of Economics, National Chung Cheng University, Chiayi, Taiwan;1. Department of Economics “Marco Biagi”, Viale Berengario 51, 41121 Modena, Italy;2. Department of Economics “Marco Biagi” and ReCent, Viale Berengario 51, 41121 Modena, Italy;1. Mechanical Engineering Research Institute of the Russian Academy of Science, 4 Maly Kharitonievsky Pereulok, Moscow 101990, Russia;1. Hanqing Advanced Institute of Economics and Finance, Renmin University of China, Beijing 100872, PR China;2. Department of Economics, National Chung Cheng University, Chiayi, 62102, Taiwan |
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| Abstract: | This paper applies a two-step Generalized Method of Moments (GMM) to re-examine the causality between defense burden (MB) and real GDP (RY) for 137 countries. The findings indicate that a short-run causality running from MB to RY is found in lower-middle- and high-income countries and that from RY to MB is found in low-income countries, while bidirectional short-run causality is found in Asia, Europe, Latin America & the Caribbean and the Middle East & North Africa. No causality is found in upper-middle-income, European & Central Asian and Sub-Saharan African countries. Thus, our results do not support that one size fits all. This paper contributes important implications to the countries for making their defense policy. |
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