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Defence Spending, Economic Growth and Regional Balance: Evidence from Azerbaijan and Armenia

Year 2024, , 397 - 426, 30.06.2024
https://doi.org/10.25229/beta.1403382

Abstract

Military expenditures have a significant impact not only on the socioeconomic condition of a state but also on the regional balance of power. In this study it will be examined the relationship between military expenditures and economic conditions in Azerbaijan and Armenia and impacts of military expeditures on the regional balance. In the context of the diplomatic history from the First Karabakh War to the Second Karabakh War, the regional balance between the two states is clarified. Then the complex relationship between military expenditures and economic conditions is empirically analyzed via using non-linear ARDL and ARDL limited test methods.
The empirical findings indicate that in Azerbaijan, military spending aligns with the Military-led Standard of Living Improvement Hypothesis, whereas its positive effect on well-being in Armenia is minimal. Specifically, military expenditure positively influences the standard of living and well-being in Azerbaijan, as evidenced by both the ARDL Bound and multiplier effect. Conversely, according to the Military Burden Hypothesis, military spending poses a burden on the budgets of both countries. Nevertheless, this burden is more pronounced for Azerbaijan compared to Armenia, where the adverse impact of military expenditure is comparatively lesser.

References

  • Asker, A., & Şeyban, S. (2021). Kürekçay Anlaşmasının tarihi arka planı, hukuki niteliği ve siyasi sonuçları. Giresun Üniversitesi İktisadi ve İdari Bilimler Dergisi, 7(1), 34-50.
  • Aslanlı, A. (2011). İlham Aliyev döneminde Azerbaycan dış politikası. EkoAvrasya. Retrieved from https://ekoavrasya.net/duyuru.aspx?did=14&Pid=10&Lang=TR (Accessed on 10th April 2021).
  • Benoit, E. (1973). Defence and growth in developing countries. Boston, MA: Heath, Lexington Books.
  • Cabbarlı, H. (2019). Ermenistan dış politikasını belirleyen ögeler ve kavramsal yaklaşım. In E. Özdaşlı and H. Cabbarlı (Eds.), Ermenistan dış politikası (1991-2019) (pp. 1-79). Ankara: Nobel Yayıncılık.
  • Çapraz, H. (2012). Rusya dış ticaret politikasında Güney Kafkasya (19. Yüzyıl). Isparta: Fakülte Kitabevi.
  • Cornell, S. E. (2001). Small powers and great powers: A study of ethnopolitical conflict in the Caucasus. London, New York: Routledge Curzon.
  • Cuthbertson, I. (1994/1995). The new ‘Great Game’. World Policy Journal, 11(4), 31-43.
  • De Waal, T. (2020). A precarious peace for Karabakh. Carnegie Moscow Center. Retrieved from https://carnegie.ru/commentary/83202 (Accessed on 3rd May 2021).
  • Deger, S., & Smith, R. P. (1983). Military expenditures and growth in less developed countries. Journal of Conflict Resolution, 27(2), 335-353.
  • Dimitraki, O., & Ali, F. M. (2013). The long-run causal relationship between military expenditure and economic growth in China: Revisited. Defence and Peace Economics, 13(1), 1-16. https://doi.org/10.1080/10242694.2013.810024
  • Dunne, J. P. (1996). Economic effects of military expenditure in developing countries: A survey. In N. P. Gleditsch, O. Bjerkholt, A. Cappelen, R. Smith, & J. P. Dunne (Eds.), The peace dividend (pp. 439-464). Amsterdam: Elsevier Science.
  • Elbir, H. Ç. (2017). Ermenistan'ın 'denge siyaseti'. Retrieved from https://avim.org.tr/tr/Yorum/ERMENISTAN-IN-DENGE-SIYASETI (Accessed on 5th May)
  • EU Neighbour. (2021). Retrieved from https://www.euneighbours.eu/en/east/stay-informed/news/eu-armenia-comprehensive-and-enhanced-partnership-agreement-enters-force (Accessed on 4th May 2021).
  • Faini, R., Annez, P., & Taylor, L. (1984). Defense spending, economic structure, and growth: Evidence among countries and over time. Economic Development and Cultural Change, 32(3), 487-498.
  • Fumitaka, F., Oishi, M., & Karim, M. A. (2016). Military expenditure and economic development in China: An empirical inquiry. Defence and Peace Economics, 27(1), 137-160. https://doi.org/10.1080/10242694.2014.898383
  • Giragossian, R. (2019). Paradox of power: Russia, Armenia and Europe after the Velvet Revolution. Retrieved from https://www.ecfr.eu/page/-/russia_armenia_and_europe_after_the_velvet_revolution.pdf (Accessed on 3rd October 2019).
  • Göksel, O. (2015). Beyond countering Iran: A political economy of Azerbaijan-Israel relations. British Journal of Middle Eastern Studies, 42(4), 655-675.
  • Greenwood-Nimmo, M., Shin, Y., & Van Treeck, T. (n.d.). The asymmetric ARDL model with multiple unknown threshold decompositions: An application to the Phillips curve in Canada preliminary and incomplete - Do not cite without permission. 19.
  • Habibbeyli, A. (2017). Reconsidering Azerbaijan’s foreign policy on the 25th anniversary of restored independence. Perceptions, 22(1), 29-48.
  • Hasanoğlu, M., & Cemilli, E. (2006). Güney Kafkasya’da ABD politikası. İstanbul: IQ Kültür Sanat Yayıncılık. Hobsbawm, E. (1994). The age of extremes: A history of the world 1914-1994. New York: Vintage Books.
  • Ismayıl, E. (2016). Rusya'nın Avrasya Birliği politikası. Avrasya Etüdleri, 49(1), 125-151.
  • İşyar, Ö. G. (2004). Bölgesel ve global güvenlik çıkarları bağlamında Sovyet-Rus dış politikaları ve Karabağ sorunu. Bursa: Alfa Yayıncılık.
  • İşyar, Ö. G. (2017). Türk dış politikası sorunlar ve süreçler. Bursa: Dora Yayıncılık.
  • Luhn, A. (2015). Armenia protests escalate after police turn on demonstrators. Retrieved from https://www.theguardian.com/world/2015/jun/24/armenia-yerevan-protests-electric-prices-russia (Accessed on 10th December 2018).
  • Mammadov, F. (2017). Azerbaijan’s geopolitical identity in the context of the 21st century challenges and prospects. Avrasya Dünyası, 1, 23-27.
  • Mammadov, F. (2018). Foreign policy postures and priorities of Azerbaijan. In M. Altınışık & O. Tanrısever (Eds.), The South Caucasus-Security, Energy and Europeanization (pp. 85-99). London, New York: Routledge.
  • Mfa. Az. (2021). Retrieved from https://mfa.gov.az/en/content/395/organization-of-islamic-cooperation-oic (Accessed on 2nd May 2021).
  • Olgun, Y. (2021). The impact of the rivalry between the Russian Tsardom and Britain in Central Asia in the 19th century on diplomacy. In B. Özdal & R. K. Karaca (Eds.), Diplomatic history-1 (pp. 493-508). Bursa: Dora Yayıncılık.
  • Özdal, B. (2017). 4 gün savaşları’nın Trans-Kafkasya’daki güç mücadelesine etkilerinin analizi. In TESAM II. Uluslararası Sosyal Bilimler Kongresi Quo Vadis Türkiye?, Bildiri Özetleri. Bursa: TESAM Yayınları.
  • Özdal, B. (2019). Orta Asya ve Kafkaslarda bölgesel ihtilaflar. In H. Kılıç & E. Toprak (Eds.), Orta Asya ve Kafkaslarda siyaset (pp. 181-207). Eskişehir: Anadolu Üniversitesi Yayınları.
  • Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289-326. https://doi.org/10.1002/jae.616
  • Ram, R. (1995). Defence expenditure and economic growth. In K. Hartley & T. Sandler (Eds.), Handbook of defence economics (pp. 251-273). Amsterdam: Elsevier. Rusya: Azerbaycan’a silah satışını sürdüreceğiz. Sputniknews. Retrieved from https://tr.sputniknews.com/rusya/201604081022040736-rusya-azerbaycan-silah-satisi/ (Accessed on 1st December 2021).
  • Şenyurt, A. H. (2012). İran-Ermenistan ilişkileri: Tecride karşı dayanışma. Bilgesam. Retrieved from http://www.bilgesam.org/incele/162/-iran-ermenistan-iliskileri--tecride-karsi-dayanisma/#.W_rMbOKhnIV (Accessed on 25th November 2018).
  • Shaffer, B. (2010). Foreign policies of the states of the Caucasus: Evolution in the post-Soviet period. Uluslararası İlişkiler Dergisi, 7(26), 51-65.
  • Shaffer, B. (2012). Azerbaijan’s foreign policy since independence. Caucasus International, 2(1), 73-84.
  • Shin, Y., Yu, B., & Greenwood-Nimmo, M. (2014). Modelling asymmetric cointegration and dynamic multipliers in a nonlinear ARDL framework. In R. C. Sickles & W. C. Horrace (Eds.), Festschrift in honor of Peter Schmidt: Econometric methods and applications (pp. 281-314). New York, NY: Springer.
  • Shlapentokh, D. (2007). Dugin Eurasianism: A window on the minds of the Russian elite or an intellectual ploy. Studies in East European Thought, 59(3), 215-236.
  • Smith, R., & Smith, D. (1980). Military expenditure, resources and development. Birkbeck College Discussion Paper, No. 87. University of London.
  • Tanrısever, O. (2016). Azerbaijan's political economy and foreign policy in 2015. In G. Novikova (Ed.), Regional security issues: 2015 (pp. 114-127). Erivan: Spectrum.
  • Ter-Matevosyan, V., & Brent, C. (2019). Conflict that did not happen: Revisiting the Javakhk affair in Georgia. Nations & Nationalism, 25(1), 340-360.
  • The Constitution of Armenia. Retrieved from https://www.president.am/en/constitution-2015/ (Accessed on 4th May 2021).
  • Valiyev, A., & Mamishova, N. (2019). Azerbaijan’s foreign policy towards Russia since independence: Compromise achieved. Southeast European and Black Sea Studies, 19(2), 1-23.
  • Yenigün, C., & Bolat, M. A. (2010). Gürcistan: Yeni dünyanın doğu-batı sınırı. In K. İnat, B. Duran & M. Ataman (Eds.), Dünya çatışmaları çatışma bölgeleri ve konuları, Cilt-1 (pp. 457-486). Ankara: Nobel Yayınları.
  • Zarifien, J. (2009). Iran and its two neighbours Armenia and Azerbaijan: Resuming relationships under America’s suspicious eyes. Iran and The Caucasus, 13, 383-400.

Savunma Harcamaları, Ekonomik Büyüme ve Bölgesel Denge: Azerbaycan ve Ermenistan'dan Kanıtlar

Year 2024, , 397 - 426, 30.06.2024
https://doi.org/10.25229/beta.1403382

Abstract

Askeri harcamalar sadece bir devletin sosyoekonomik durumu üzerinde değil, aynı zamanda bölgesel güç dengesi üzerinde de önemli bir etkiye sahiptir. Bu çalışmada, Azerbaycan ve Ermenistan'daki askeri harcamalar ile ekonomik koşullar arasındaki ilişki ve bu harcamaların bölgesel denge üzerindeki etkileri incelenmektedir. Birinci Karabağ Savaşı'ndan İkinci Karabağ Savaşı'na kadar olan diplomasi tarihi bağlamında, iki devlet arasındaki bölgesel denge açıklığa kavuşturulmaktadır. Ardından, askeri harcamalar ile ekonomik koşullar arasındaki karmaşık ilişki, non-linear ARDL ve ARDL sınırlı test yöntemleriyle empirik olarak analiz edilmektedir.
Empirik bulgular, Azerbaycan'da askeri harcamaların Askeri Destekli Yaşam Standardı İyileştirme Hipotezi ile uyumlu olduğunu, Ermenistan'da ise refah üzerindeki olumlu etkisinin minimal düzeyde olduğunu göstermektedir. Özellikle, askeri harcamalar, hem ARDL Bağlantısı hem de çarpan etkisi ile kanıtlandığı üzere, Azerbaycan'da yaşam standardını ve refahı olumlu yönde etkilemektedir. Tersine, Askeri Yük Hipotezine göre, askeri harcamalar her iki ülkenin bütçeleri üzerinde bir yük oluşturmaktadır. Bununla birlikte, bu yük, askeri harcamaların olumsuz etkisinin nispeten daha az olduğu Ermenistan'a kıyasla Azerbaycan için daha belirgindir.

References

  • Asker, A., & Şeyban, S. (2021). Kürekçay Anlaşmasının tarihi arka planı, hukuki niteliği ve siyasi sonuçları. Giresun Üniversitesi İktisadi ve İdari Bilimler Dergisi, 7(1), 34-50.
  • Aslanlı, A. (2011). İlham Aliyev döneminde Azerbaycan dış politikası. EkoAvrasya. Retrieved from https://ekoavrasya.net/duyuru.aspx?did=14&Pid=10&Lang=TR (Accessed on 10th April 2021).
  • Benoit, E. (1973). Defence and growth in developing countries. Boston, MA: Heath, Lexington Books.
  • Cabbarlı, H. (2019). Ermenistan dış politikasını belirleyen ögeler ve kavramsal yaklaşım. In E. Özdaşlı and H. Cabbarlı (Eds.), Ermenistan dış politikası (1991-2019) (pp. 1-79). Ankara: Nobel Yayıncılık.
  • Çapraz, H. (2012). Rusya dış ticaret politikasında Güney Kafkasya (19. Yüzyıl). Isparta: Fakülte Kitabevi.
  • Cornell, S. E. (2001). Small powers and great powers: A study of ethnopolitical conflict in the Caucasus. London, New York: Routledge Curzon.
  • Cuthbertson, I. (1994/1995). The new ‘Great Game’. World Policy Journal, 11(4), 31-43.
  • De Waal, T. (2020). A precarious peace for Karabakh. Carnegie Moscow Center. Retrieved from https://carnegie.ru/commentary/83202 (Accessed on 3rd May 2021).
  • Deger, S., & Smith, R. P. (1983). Military expenditures and growth in less developed countries. Journal of Conflict Resolution, 27(2), 335-353.
  • Dimitraki, O., & Ali, F. M. (2013). The long-run causal relationship between military expenditure and economic growth in China: Revisited. Defence and Peace Economics, 13(1), 1-16. https://doi.org/10.1080/10242694.2013.810024
  • Dunne, J. P. (1996). Economic effects of military expenditure in developing countries: A survey. In N. P. Gleditsch, O. Bjerkholt, A. Cappelen, R. Smith, & J. P. Dunne (Eds.), The peace dividend (pp. 439-464). Amsterdam: Elsevier Science.
  • Elbir, H. Ç. (2017). Ermenistan'ın 'denge siyaseti'. Retrieved from https://avim.org.tr/tr/Yorum/ERMENISTAN-IN-DENGE-SIYASETI (Accessed on 5th May)
  • EU Neighbour. (2021). Retrieved from https://www.euneighbours.eu/en/east/stay-informed/news/eu-armenia-comprehensive-and-enhanced-partnership-agreement-enters-force (Accessed on 4th May 2021).
  • Faini, R., Annez, P., & Taylor, L. (1984). Defense spending, economic structure, and growth: Evidence among countries and over time. Economic Development and Cultural Change, 32(3), 487-498.
  • Fumitaka, F., Oishi, M., & Karim, M. A. (2016). Military expenditure and economic development in China: An empirical inquiry. Defence and Peace Economics, 27(1), 137-160. https://doi.org/10.1080/10242694.2014.898383
  • Giragossian, R. (2019). Paradox of power: Russia, Armenia and Europe after the Velvet Revolution. Retrieved from https://www.ecfr.eu/page/-/russia_armenia_and_europe_after_the_velvet_revolution.pdf (Accessed on 3rd October 2019).
  • Göksel, O. (2015). Beyond countering Iran: A political economy of Azerbaijan-Israel relations. British Journal of Middle Eastern Studies, 42(4), 655-675.
  • Greenwood-Nimmo, M., Shin, Y., & Van Treeck, T. (n.d.). The asymmetric ARDL model with multiple unknown threshold decompositions: An application to the Phillips curve in Canada preliminary and incomplete - Do not cite without permission. 19.
  • Habibbeyli, A. (2017). Reconsidering Azerbaijan’s foreign policy on the 25th anniversary of restored independence. Perceptions, 22(1), 29-48.
  • Hasanoğlu, M., & Cemilli, E. (2006). Güney Kafkasya’da ABD politikası. İstanbul: IQ Kültür Sanat Yayıncılık. Hobsbawm, E. (1994). The age of extremes: A history of the world 1914-1994. New York: Vintage Books.
  • Ismayıl, E. (2016). Rusya'nın Avrasya Birliği politikası. Avrasya Etüdleri, 49(1), 125-151.
  • İşyar, Ö. G. (2004). Bölgesel ve global güvenlik çıkarları bağlamında Sovyet-Rus dış politikaları ve Karabağ sorunu. Bursa: Alfa Yayıncılık.
  • İşyar, Ö. G. (2017). Türk dış politikası sorunlar ve süreçler. Bursa: Dora Yayıncılık.
  • Luhn, A. (2015). Armenia protests escalate after police turn on demonstrators. Retrieved from https://www.theguardian.com/world/2015/jun/24/armenia-yerevan-protests-electric-prices-russia (Accessed on 10th December 2018).
  • Mammadov, F. (2017). Azerbaijan’s geopolitical identity in the context of the 21st century challenges and prospects. Avrasya Dünyası, 1, 23-27.
  • Mammadov, F. (2018). Foreign policy postures and priorities of Azerbaijan. In M. Altınışık & O. Tanrısever (Eds.), The South Caucasus-Security, Energy and Europeanization (pp. 85-99). London, New York: Routledge.
  • Mfa. Az. (2021). Retrieved from https://mfa.gov.az/en/content/395/organization-of-islamic-cooperation-oic (Accessed on 2nd May 2021).
  • Olgun, Y. (2021). The impact of the rivalry between the Russian Tsardom and Britain in Central Asia in the 19th century on diplomacy. In B. Özdal & R. K. Karaca (Eds.), Diplomatic history-1 (pp. 493-508). Bursa: Dora Yayıncılık.
  • Özdal, B. (2017). 4 gün savaşları’nın Trans-Kafkasya’daki güç mücadelesine etkilerinin analizi. In TESAM II. Uluslararası Sosyal Bilimler Kongresi Quo Vadis Türkiye?, Bildiri Özetleri. Bursa: TESAM Yayınları.
  • Özdal, B. (2019). Orta Asya ve Kafkaslarda bölgesel ihtilaflar. In H. Kılıç & E. Toprak (Eds.), Orta Asya ve Kafkaslarda siyaset (pp. 181-207). Eskişehir: Anadolu Üniversitesi Yayınları.
  • Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289-326. https://doi.org/10.1002/jae.616
  • Ram, R. (1995). Defence expenditure and economic growth. In K. Hartley & T. Sandler (Eds.), Handbook of defence economics (pp. 251-273). Amsterdam: Elsevier. Rusya: Azerbaycan’a silah satışını sürdüreceğiz. Sputniknews. Retrieved from https://tr.sputniknews.com/rusya/201604081022040736-rusya-azerbaycan-silah-satisi/ (Accessed on 1st December 2021).
  • Şenyurt, A. H. (2012). İran-Ermenistan ilişkileri: Tecride karşı dayanışma. Bilgesam. Retrieved from http://www.bilgesam.org/incele/162/-iran-ermenistan-iliskileri--tecride-karsi-dayanisma/#.W_rMbOKhnIV (Accessed on 25th November 2018).
  • Shaffer, B. (2010). Foreign policies of the states of the Caucasus: Evolution in the post-Soviet period. Uluslararası İlişkiler Dergisi, 7(26), 51-65.
  • Shaffer, B. (2012). Azerbaijan’s foreign policy since independence. Caucasus International, 2(1), 73-84.
  • Shin, Y., Yu, B., & Greenwood-Nimmo, M. (2014). Modelling asymmetric cointegration and dynamic multipliers in a nonlinear ARDL framework. In R. C. Sickles & W. C. Horrace (Eds.), Festschrift in honor of Peter Schmidt: Econometric methods and applications (pp. 281-314). New York, NY: Springer.
  • Shlapentokh, D. (2007). Dugin Eurasianism: A window on the minds of the Russian elite or an intellectual ploy. Studies in East European Thought, 59(3), 215-236.
  • Smith, R., & Smith, D. (1980). Military expenditure, resources and development. Birkbeck College Discussion Paper, No. 87. University of London.
  • Tanrısever, O. (2016). Azerbaijan's political economy and foreign policy in 2015. In G. Novikova (Ed.), Regional security issues: 2015 (pp. 114-127). Erivan: Spectrum.
  • Ter-Matevosyan, V., & Brent, C. (2019). Conflict that did not happen: Revisiting the Javakhk affair in Georgia. Nations & Nationalism, 25(1), 340-360.
  • The Constitution of Armenia. Retrieved from https://www.president.am/en/constitution-2015/ (Accessed on 4th May 2021).
  • Valiyev, A., & Mamishova, N. (2019). Azerbaijan’s foreign policy towards Russia since independence: Compromise achieved. Southeast European and Black Sea Studies, 19(2), 1-23.
  • Yenigün, C., & Bolat, M. A. (2010). Gürcistan: Yeni dünyanın doğu-batı sınırı. In K. İnat, B. Duran & M. Ataman (Eds.), Dünya çatışmaları çatışma bölgeleri ve konuları, Cilt-1 (pp. 457-486). Ankara: Nobel Yayınları.
  • Zarifien, J. (2009). Iran and its two neighbours Armenia and Azerbaijan: Resuming relationships under America’s suspicious eyes. Iran and The Caucasus, 13, 383-400.
There are 44 citations in total.

Details

Primary Language English
Subjects Time-Series Analysis, Political Economy Theory, Political Economy
Journal Section Articles
Authors

Murat Jane 0000-0002-2409-131X

Mortaza Ojaghlou 0000-0003-4580-6182

Early Pub Date June 29, 2024
Publication Date June 30, 2024
Submission Date December 11, 2023
Acceptance Date March 19, 2024
Published in Issue Year 2024

Cite

APA Jane, M., & Ojaghlou, M. (2024). Defence Spending, Economic Growth and Regional Balance: Evidence from Azerbaijan and Armenia. Bulletin of Economic Theory and Analysis, 9(2), 397-426. https://doi.org/10.25229/beta.1403382