Military expenditure,economic growth and structural instability: a case study of South Africa |
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Authors: | Goodness C. Aye Mehmet Balcilar Rangan Gupta Reneé van Eyden |
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Affiliation: | 1. Department of Economics, University of Pretoria, Pretoria, South Africa;2. Department of Economics, Eastern Mediterranean University, Famagusta, Turkey |
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Abstract: | This paper contributes to the growing literature on the milex-growth nexus, by providing a case study of South Africa and considering the possibility of structural breaks by applying newly developed econometric methods. Using full sample bootstrap Granger non-causality tests, no Granger causal link is found between military expenditure and GDP for 1951–2010, but parameter instability tests show the estimated VARs to be unstable. Using a bootstrap rolling window estimation procedure, however, finds evidence of bidirectional Granger causality in various subsamples. This implies standard Granger non-causality tests, which neither account for structural breaks nor time variation may be invalid. |
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Keywords: | Military spending Economic growth Bootstrap Time varying causality |
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