Does Military Spending Really Matter for Economic Growth in China and G7 Countries: The Roles of Dependency and Heterogeneity |
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| Authors: | Tsangyao Chang Ken Hung Kuo-Hao Lee |
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| Institution: | 1. Department of Finance, Feng Chia University, Taichung, Taiwan.;2. Division of International Banking and Finance Studies, Texas A&3. M International University, Laredo, Texas, USA.;4. Department of Finance, Bloomsburg University of Pennsylvania, Bloomsburg, Pennsylvania, USA. |
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| Abstract: | This study revisits the causal linkages between military spending and economic growth in China and G7 countries (i.e. Canada, France, Germany, Italy, Japan, the UK, and the USA) by focusing country-specific analysis for the period 1988–2010. The panel causality analysis, which accounts for both cross-country dependency and heterogeneity across countries, is employed in this study. Our results find evidence of the neutrality hypothesis for Italy, France, and Germany, the military spending–growth detriment hypothesis for both Canada and the UK, and one-way Granger causality running from economic growth to military spending for China. Furthermore, we find a feedback between military spending and economic growth in both Japan and the USA. Thus, our results do not support that one size fits all. |
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| Keywords: | Military expenditure Economic growth Dependency and heterogeneity Panel causality test China and G7 Countries |
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