Defense spending and economic growth across the Taiwan straits: a threshold regression model |
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| Authors: | CHUNG‐NANG LAI BWO‐NUNG HUANG † CHIN‐WEI YANG |
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| Affiliation: | 1. Armed Forces College , National Defense University , Taoyuan, Taiwan;2. Department of Economics and Center for IDAF , National Chung‐Cheng University , Chia‐Yi, Taiwan 621;3. Department of Economics , Clarion University of Pennsylvania , Clarion, PA 16214‐1232, USA |
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| Abstract: | This paper employs both linear and non‐linear models to investigate the relationship between national defense spending and economic growth for Taiwan and China. Using data from 1953–2000 on defense spending, GDP, import, export and capital, we find that China's defense spending leads that of Taiwan. There exists the phenomenon of an arms race between both countries when official Chinese data are used. On the one hand, feedback relations prevail between economic growth and defense spending growth in Taiwan. On the other hand, China's national defense is found to lead economic growth. |
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| Keywords: | Arms race Multivariate threshold models Defense spending Economic growth |
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