Top

Quality & Quantity

Published in:

15-05-2015

Military expenditures and economic growth: allowing structural breaks in time series analysis in the case of India and Pakistan

Authors: Abdul Jalil, Hafiz Khuram Nadeem Abbasi, Nazia Bibi

Published in: Quality & Quantity | Issue 4/2016

Activate our intelligent search to find suitable subject content or patents.

search-config

AI-assisted search

Off

Abstract

This paper investigates the long run relationship between military expenditures and economic growth in case of Pakistan and India using ARDL bounds testing approach for cointegration and Clemente–Montanes–Reyes approach for unit roots keeping structural breaks in a longer time series data. The study confirms the positive relationship between military expenditures and economic growth at the initial stages and then a negative relationship after a critical point for both countries. The short run results also confirm that the military expenditures can explain the per capita GDP in the short run. Importantly, the causality runs from military expenditures to GDP.

previous article Impact of raising awareness of respondents on the measurement quality in a web survey

next article The changing nature of attitude constructs: an application of multiple correspondence analysis on gender role attitudes

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

inform now

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

inform now

We refer the original article for the technical discussion and mathematical derivation of the tests. We deliberately dropped it keeping brevity in mind.

The results are not presented keeping brevity in mind.

We are not presenting the results here keeping brevity in mind. However, these are available on request.

Aghion, P., Akcigit, U., Howitt, P.: What do we learn from schumpeterian growth theory? NBER Working Papers, No. 18824 (2013)

Aizenman, J., Glick, R.: Military expenditure, threats, and growth. J. Trade Econ. Dev. 15, 129–155 (2006)CrossRef

Alexander, W.R.J.: The impact of defence spending on economic growth: a multi-sectoral approach to defence spending and economic growth with evidence from developed economies. Def. Econ. 2, 39–55 (1990)CrossRef

Ang, J.B.: Finance and inequality: the case of India. South. Econ. J. 76, 738–761 (2010)CrossRef

Ang, J.B.: Financial development, liberalization and technological deepening. Eur. Econ. Rev. 55, 688–701 (2011)

Anwar, A., Rafique, Z., Joiya, S.: Defence spending-economic growth nexus: a case study of Pakistan. Pak. Econ. Soc. Rev. 50, 163–182 (2012)

Atesoglu, H.S.: Defense spending promotes aggregate output in the United States: evidence from cointegration analysis. Def. Peace Econ. 13, 55–60 (2002)CrossRef

Atesoglu, H.S., Mueller, M.J.: Defense spending and economic growth. Def. Econ. 2, 19–27 (1990)CrossRef

Benoit, E.: Growth and defense in developing countries. Econ. Dev. Cult. Change 26, 271–287 (1978)CrossRef

Biswas, B., Ram, R.: Military expenditures and economic growth in less developed countries: an augmented model and further evidence. Econ. Dev. Cult. Change 34(2), 361–372 (1986)CrossRef

Brown, R.L., Durbin, J., Evans, J.M.: Techniques for testing the constancy of regression relations over time. J. R. Stat. Soc. 37, 149–163 (1975)

Chan, K.S.: The international negotiation game: some evidence from the Tokyo Round. Rev. Econ. Stat. 67(3), 456–464 (1985)

Chletsos, M., Kollias, C.: The demand for Turkish military expenditure 1960–1992. Cyprus J. Econ. 8, 864–874 (1995)

Clemente, J., Montañés, A., Reyes, M.: Testing for a unit root in variables with a double change in the mean. Econ. Lett. 59, 175–182 (1998)CrossRef

Deger, S.: Economic development and defense expenditures. Econ. Dev. Cult. Change 35, 179–196 (1986)CrossRef

Deger, S., Smith, R.P.: Military expenditures and growth in less developed countries. J. Confl. Resolut. 27, 335–353 (1983)CrossRef

Deger, S., Sen, S.: Military security and the economy: defence expenditure in India and Pakistan. In: Hartley, K., Sandler, T. (eds.) The economics of defence spending, Routledge, London (1990)

Dunne, J., Nikolaidou, E., Smith, R.: Arms race models and econometric applications. In: Conference on the Arms Trade, Security and Conflict at Middlesex University Business School London (2000)

Dunne, P., Nikolaidou, E., Vougas, D.: Defence spending and economic growth: a causal analysis for Greece and Turkey. Def. Peace Econ. 12(1), 5–26 (2001)

Dunne, P., Roux, A.: Introduction: defence, peace and economic growth in South Africa. Def. Peace Econ. 11, 549–551 (2000)CrossRef

Engle, R.F., Granger, C.W.J.: Co-integration and error correction: representation, estimation, and testing. Econometrica 55, 251–276 (1987)CrossRef

Faini, R., Annez, P., Taylor, T.: Defence spending, economic structure and growth evidence among countries and overtime. Econ. Dev. Cult. Change 32, 487–498 (1984)CrossRef

Feder, G.: On exports and economic growth. J. Dev. Econ. 12, 59–73 (1982)CrossRef

Feridun, M., Sawhney, B., Shahbaz, M.: Impact of military spending on economic growth: the case of North Cyprus. Def. Peace Econ. 22(5), 555–562 (2011)

Fredericksen, P.C., Looney, R.E.: Defence expenditures and economic growth in developing countries: some further empirical evidence. J. Econ. Dev. 7, 113–126 (1982)

Gregory, A.W., Hansen, B.E.: Residual-based tests for cointegration in models with regime shifts. J. Econ. 70, 99–126 (1996)

Halicioglu, F.: An econometrical analysis of effects of aggregate defence spending on aggregate output. In: METU International Conference in Economics/VII, 6–9 September 2003, Ankara, Turkey (2003)

Halicioglu, F.: Defense spending and economic growth in Turkey: An empirical application of new macroeconomic theory. Review of Middle East Economics and Finance 2, 193–201 (2004)CrossRef

Jalil, A., Feridun, M., Ma, Y.: Finance-growth nexus in China revisited: new evidence from principal components and ARDL bounds tests. Int. Rev. Financ. Econ. 19, 189–195 (2010)CrossRef

Johansen, S., Juselius, K.: Maximum likelihood estimation and inference on cointegration with applications to the demand for money. Oxford Bull. Econ. Stat. 52, 169–210 (1990)CrossRef

Karagol, E.: The relationship between external debt, defence expenditures and GNP revisited: the case of Turkey. Def. Peace Econ. 17, 47–57 (2006)CrossRef

Khan, M. H.: Defence expenditure and macroeconomic stabilization: causality evidence from Pakistan. In: SBP Working Paper Series, State Bank of Pakistan (2004)

Khan, S.U.: Macro determinants of total factor productivity in Pakistan. SBP Working Paper, vol. 2, No. 2 (2006)

Klein, T.: Military expenditure and economic growth: Peru 1970–1996. Def. Peace Econ. 15, 275–288 (2004)CrossRef

Kentor, J., Kick, E.: Bringing the military back. J. World Syst. Res. 1, 142–172 (2008)

Khilji, N.M., Mahmood, A.: Military expenditures and economic growth in Pakistan. Pak. Dev. Rev. 36, 791–808 (1997)

King, R., Levine, R.: Finance and growth: schumpeter might be right. Q. J. Econ. 108(3), 717–737 (1993)

LaCivita, C.J., Frederiksen, P.C.: Defence spending and economic growth: an alternative approach to the causality issue. J. Dev. Econ. 35, 117–126 (1991)CrossRef

Lai, C.N., Huang, B.N., Yang, C.W.: Defense spending and economic growth across the Taiwan straits: a threshold regression model. Def. Peace Econ. 16, 45–57 (2005)CrossRef

Lim, D.: Another look at growth and defence in developed countries. Econ. Dev. Cult. Change 31, 377–384 (1983)CrossRef

Looney, R.: Defence expenditure and economic performance in South Asia: test of causality and interdependence. Confl. Manag. Peace Sci. 11, 37–68 (1991)CrossRef

Looney, R., Mcnab, R.: Pakistan’s economic and security dilemma: expanded defence expenditures and the relative governance syndrome. Contemp. South Asia 16, 63–82 (2008)CrossRef

Mankiw, G., Romer, D., Weil, N.: A contribution to the empirics of economic growth. Q. J. Econ. 107, 407–437 (1992)

Mintz, A., Huang, C.: Defense expenditures, economic growth and the ‘peace’ dividend. Am. Polit. Sci. Rev. 84, 1283–1293 (1990)CrossRef

Mubarik, Y.A.: Inflation and growth: an estimate of the threshold level of inflation in Pakistan. SBP Working Paper Series, vol. 1(1), pp. 35–44 (2005)

Mueller, M.J., Atesoglu, H.S.: Defense spending, technological change and economic growth in the United States. Def. Peace Econ. 4, 259–269 (1993)CrossRef

Murdoch, J.C., Pi, C.-R., Sandler, T.: The impact of defence and non-defence public spending on growth in Asia and Latin America. Def. Peace Econ. 8, 205–224 (1997)

Mylonidis, N.: Revisiting the nexus between military spending and growth in the European Union. Def. Peace Econ. 19, 265–272 (2008)CrossRef

Narayan, P., Narayan, S.: The short run relationship between financial system and economic growth: new evidence from regional panels. Int. Rev. Financ. Anal. 29, 70–78 (2013)CrossRef

Ocal, N.: Are the military expenditures of India and Pakistan external determinants for each other: an empirical investigation. Def. Peace Econ. 14, 41–149 (2003)CrossRef

Phillips, P., Perron, Pierre: Testing for a unit root in time series regression. Biometrica 75, 335–346 (1988)CrossRef

Pesaran, M.H., Smith, R.P.: Structural analysis of cointegrating VARs. J. Econ. Surv. 12, 471–505 (1998)CrossRef

Pesaran, M.H., Shin, Y., Smith, R.J.: Bounds testing approaches to the analysis of level relationships. J. Appl. Econ. 16, 289–326 (2001)CrossRef

Ram, R.: Government size and economic growth: a new framework and some evidence from cross-section and time-series data. Am. Econ. Rev. 76, 191–203 (1986)

Sezgin, S.: Country survey x: defence spending in Turkey. Def. Peace Econ. 8, 381–409 (1997)CrossRef

Sezgin, S.: An empirical analysis of Turkey’s defence–growth relationships with a multi-equation model (1956–1994). Def. Peace Econ. 12, 69–81 (2001)CrossRef

Sezgin, S.: An empirical note on external debt and defence expenditures in Turkey. Def. Peace Econ. 15, 1–14 (2004)CrossRef

Shahbaz, M., Afza, T., Shabbir, S.: Does defence spending impede economic growth? Co integration and causality analysis for Pakistan. Def. Peace Econ. 24, 105–120 (2012)CrossRef

Smith, R.: Military expenditure and investment in OECD countries, 1954–1973. J. Comp. Econ. 4, 19–32 (1980)CrossRef

Starr, H., Hoole, F.W., Hart, J.A., Freeman, J.R.: The relationship between defense spending and inflation. J. Confl. Res. 28(1), 103–122 (1984)

Stewart, D.B.: Economic growth and the defense burden in Africa and Latin America: simulations from a dynamic model. Econ. Dev. Cult. Change 40, 189–207 (1991)CrossRef

Tahir, R.: Defence spending and economic Growth: re-examining the issue of causality for Pakistan and India. Pak. Dev. Rev. 34, 1109–1117 (1995)

Tibbett, J.S., Akram-Lodhi, A.H.: Militarization and maldevelopment: the India–Pakistan arms race. Scand. J. Dev. Altern. Area Stud. 16, 157–182 (1997)

Tiwari, A.K., Shahbaz, M.: Does defence spending stimulate economic growth in india? A revisit. Def. Peace Econ. 24, 371–395 (2012)CrossRef

Tzeng, S., Lai, C., Huang, C.: Does military expenditure matter for inflation an economic growth? Def. Peace Econ. 19, 471–478 (2008)CrossRef

Ward, M.D., Davis, D.: Sizing up the peace dividend: economic growth and military spending in the United States, 1948–1996. Am. Polit. Sci. Rev. 86, 748–755 (1992)CrossRef

Ward, M.D., Davis, D., Penubarti, M., Rajmaira, S., Cochran, M.: Military spending in India-country survey. Def. Peace Econ. 3, 41–63 (1991)CrossRef

Wijeweera, A., Webb, M.: Military spending and economic growth in Sri Lanka: a time series analysis. Def. Peace Econ. 20, 499–508 (2009)CrossRef

Yildirim, J., Ocal, N.: Arms race and economic growth: the case of India and Pakistan. Def. Peace Econ. 17, 37–45 (2006)CrossRef

Yildirim, J., Sezgin, S., Öcal, N.: Military expenditure and economic growth in middle eastern countries: a dynamic panel data analysis. Def. Peace Econ. 16, 283–295 (2005)CrossRef

Title: Military expenditures and economic growth: allowing structural breaks in time series analysis in the case of India and Pakistan
Authors: Abdul Jalil
Hafiz Khuram Nadeem Abbasi
Nazia Bibi
Publication date: 15-05-2015
Publisher: Springer Netherlands
Published in: Quality & Quantity / Issue 4/2016
Print ISSN: 0033-5177
Electronic ISSN: 1573-7845
DOI: https://doi.org/10.1007/s11135-015-0217-x

Springer Professional

Abstract

Please log in to get access to your license.

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Springer Professional "Wirtschaft"

Other articles of this Issue 4/2016

Structural equation modeling for analysing the impact of quality of administrative practices in higher educational institutions

Impact of raising awareness of respondents on the measurement quality in a web survey

Refining measures of group mutual coherence

Terrorism and India: an economic perspective

Causality between research output in the field of biotechnology and economic growth in Turkey

Education and employment in Italy of the cohort of adults born in 1954–1958: an analysis from 1993 to 2009

Premium Partner