Panel Causality Analysis Between Defence Expenditure and Economic Growth in Developed Countries |
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| Authors: | Metehan Yilgör Erdal Tanas Karagöl Çi?dem Ate? Saygili |
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| Institution: | 1. Department of Econometrics, Bandirma Faculty of Economics and Administrative Sciences, Balikesir University, Bandirma, Turkey.metehan@balikesir.edu.tr;3. Department of Economics, Faculty of Political Sciences, Y?ld?r?m Beyaz?t University, Ankara, Turkey.;4. Department of Econometrics, Bandirma Faculty of Economics and Administrative Sciences, Balikesir University, Bandirma, Turkey. |
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| Abstract: | There is much controversy in the literature over whether military expenditures have a positive, negative or no relation impact on economic growth. The aim of this paper is to determine the relationship between GDP and defence expenditure. The study analyses GDP and defence expenditures of the developed countries with cross-sectional ADF and SURADF unit root tests using annual data for the years 1980–2007. We conclude that in the long term, according to the Pedroni cointegration test, there exists a relationship between defence expenditure and economic growth. Furthermore, by utilizing the Granger causality test, we find that defence expenditure is a factor in economic growth. In other words, our study validates the hypothesis that defence spending by economically developed countries positively contributes to their economics. |
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| Keywords: | Defence Expenditure GDP CADF SURADF cointegration test Causality test |
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