MODELLING THE RELATIONSHIP BETWEEN DEFENSE SPENDING AND ECONOMIC GROWTH FOR THE FIJI ISLANDS

The goal of this paper is to examine the nexus between GDP and military expenditure. We model this relationship within a multivariate framework by including exports in the model. We use the recently developed bounds testing approach to cointegration and find that there is a long run relationship among the variables when GDP is the endogenous variable. Normalizing on GDP and using four different estimators, we find that in the long run both military expenditure and exports have a positive impact on GDP. Finally, using the Granger causality test, we find that there is evidence for military expenditure Granger causing exports and exports Granger causing GDP, implying that military expenditure indirectly Granger causes GDP in the short run. In the long run, we find that both military expenditure and exports Granger cause GDP for Fiji. Our findings are consistent with the Keynesian school of thought, leading us to derive some policy implications.     

Military spending and economic growth in South Africa

This paper undertakes an empirical analysis of the economic effects of military spending on the South African economy. It estimates a neo‐classical model common in the literature at the level of the macroeconomy and at the level of the manufacturing sector. An attempt is made to improve upon the model by allowing the data to determine the dynamic structure of the model through an ARDL procedure. No significant impact of military spending is found in aggregate, but there is a significant negative impact for the manufacturing sector. This suggests that the cuts in domestic military procurement that have occurred since 1989 could lead to improved economic performance in South Africa through their impact on the manufacturing sector.     

Measuring defense conversion in Russian industry

This paper develops and implements a methodology for quantifying defense conversion in Russian manufacturing in the early 1990s. A two‐sector, three‐good model is employed to analyze the flows of resources from military to non‐military uses and applied to firm‐level survey data under alternative definitions of military production and the MIC. An aggregation framework is constructed to estimate the total quantity and change in Russian military production, the latter decomposed into intrafirm and intersectoral resource reallocation and overall industrial decline. Although there is evidence of substantial decline in military production, the data show little reallocation to productive civilian uses, neither within the MIC nor to other manufacturing sectors.     

What determines military allocations in Africa: Theoretical and empirical investigations

This paper investigates theoretically and empirically the determinants of military spending in Africa. It specifies a formal model and uses time‐series and cross‐sectional estimations to ascertain the reasons behind variations in military allocations across and within 40 African countries during 1960–1991. The differences in military expenditures appear to reflect a complex of economic, political, and strategic factors at both national and international levels. Strategic considerations are, however, found to be the most important factors in most African countries.     

Book review

Jacques Fontanel, Les dépenses militaires et le désarmement, Editions Publisud, Paris, 1995, 136 pages.

Jean‐Paul Hébert ’Production d'armement — Mutilation du systéme français’, Paris 1995 La documentation française, 221 pages.     

The Long-run Causal Relationship Between Military Expenditure and Economic Growth in China: Revisited

This paper re-examines the long-run causal relationship between military expenditure and economic growth in China over the period 1952–2010. An empirical econometric analysis based on a Barro-style growth model is conducted. By employing the Bartlett corrected trace test, which provides better approximations of the finite sample distribution to determine the rank of cointegration, the results support the existence of a single long-run equilibrium relationship between the variables. Furthermore, it is confirmed that the cumulated shocks of military expenditure primarily originate from different components of shocks that relate to economic development rather than the other way round.     

The Impact of Military Spending on Economic Growth: The Case of North Cyprus

The present study aims at investigating the causal relationship between defence expenditures and economic growth in the case of North Cyprus using the Autoregressive Distributed Lag (ARDL) bounds testing approach to cointegration and Granger causality tests for the period from 1977 to 2007. The results suggest that the variables in question are in a long-run equilibrium relationship and that there exists a strong, positive unidirectional causality running from defence expenditures to economic growth.     

MILITARY SPENDING AND ECONOMIC GROWTH IN SOUTH ASIA: COMMENT AND RECONSIDERATION

In a recent paper in this journal, Wijewerra and Webb study the connection between military spending and gross domestic product (GDP) in a group of five South Asian countries, finding a small but statistically significant positive relationship between military spending and GDP. This paper reviews their approach and proposes an alternative which tries to deal with the problems of omitted variables and variable construction. It finds, in contrast, that a higher share of military spending in GDP is associated with lower growth of GDP per capita.