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THE RELATIONSHIP BETWEEN MILITARY EXPENDITURES AND ECONOMIC GROWTH IN NATO COUNTRIES: PANEL DATA ANALYSIS UNDER CROSS-SECTION DEPENDENCY

Year 2016, Volume: 12 Issue: 28, 209 - 223, 01.04.2016
https://doi.org/10.17130/ijmeb.20162819853

Abstract

As though it is a frequently researched topic that the relationship between military expenditures and economic growth, it is ignored that the level of military expenditures of countries based on their rival and allied countries or international organizations which they are members. Accordingly, in study, the relationship between military expenditures and economic growth is examined with the panel data analysis considering the cross-section dependency for 14 NATO countries. In order to determine the causal relationship among variables the panel causality method developed by Dumitrescu and Hurlin 2012 is used, to investigate the causal relations of separately for each country sequential panel selection method is utilized. The results of study show that feedback hypothesis exists for the U.S. and growth hypothesis is valid for Canada, the United Kingdom, Italy and Norway

References

  • Atesoglu, H.S. (2002). Defense spending promotes aggregate output in the United States – Evidence from cointegration analysis. Defence and Peace Economics 13(1) 55–60.
  • Barro, R.J. (1990). Government spending in a simple model of endogenous growth. Journal of Political Economy, 98(5), 103–125.
  • Batchelor, P., Dunne, P., & Saal, D. (2000). Military spending and economic growth in South Africa. Defence and Peace Economics, 11(6), 553–571.
  • Benoit, E. (1973). Defense and economic growth in developing countries. Boston: D.C. Heath & Company.
  • Benoit, E. (1978). Growth and defense spending in developing countries. Economic Development and Cultural Change, 34, 176-196.
  • Biswas, R., & Ram, R. (1986). Military expenditure and economic growth in LDC: An augmented model and further evidence. Economic Development and Cultural Change, 34(2) 361–372.
  • Breusch, T. & Pagan, A. (1980). The LM test and its application to model specification in econometrics. Review of Economic Studies 47(1) 239–253.
  • Cappelen, A., Gleditsch, N.P. & Bjerkholt, O. (1984). Military spending and economic growth in the OECD countries. Journal of Peace Research, 21(4) 361–373.
  • Chang, T., Lee, C. C., Hung, K., & Lee, K, H, (2014). Does military spending really matter for economic growth in China and G7 countries: The roles of dependency and heterogeneity. Defence and Peace Economics, 1-15.
  • Chang, T., Lee,C.C, & Chu, H.P., (2015). Revisiting the defense–growth nexus in european countries. Defence and Peace Economics, 26(3) 341-356.
  • Chortareas, G. & Kapetanios, G., (2009). Getting PPP right: Identifying Mean-reverting real exchange rates in panels. Journal of Banking & Finance. 33(2), 390-404.
  • Chowdhury, A.R. (1991). A causal analysis of defence spending and economic growth. Journal of Conflict Resolution, 35(1) 80–97.
  • Cuaresma, J.C. & Reitschuler, G. (2003). A nonlinear defence-growth nexus? Evidence from the US economy. Defence and Peace Economics, 15(1) 71–82.
  • Deger, S. (1986). Economic development and defense expenditure. Economic Development and Cultural Change, 35(1), 179-196
  • Deger, S., & Smith, R. (1983). Military expenditure and growth in less developed countries. Journal of Conflict Resolution, 28(2) 335–353.
  • Dumitrescu, E.I., & Hurlin, C. (2012). Testing for Granger non-causality in heterogeneous panels. Economic Modelling, 29(4),1450-1460.
  • Dunne, P. & Vougas, D. (1999). Military spending and economic growth in South Africa. Journal of Conflict Resolution, 43(4) 521–537.
  • Dunne, P., Nikolaidou, E. & Vougas, D. (2001) Defence spending and economic growth: a causal analysis for Greece and Turkey. Defence and Peace Economics 12(1) 5–26.
  • Esen, S., Zeren, F. & Sımdı, H., (2015). CDS and stock market: Panel evidence under cross- section dependency. South-Eastern Europe Journal of Economics, 1, 31-46.
  • Feridun, M., Sawhney, B., & Shahbaz, M. (2011). The impact of military spending on economic growth: The case of north Cyprus. Defence and Peace Economics, 22(5) 555–562.
  • Görkem, H., & Serkan, I. (2008). Türkiye’de savunma harcamaları ve ekonomik büyüme arasındaki ilişki (1968-2006). Marmara Üniversitesi İİBF Dergisi, 25(2), 405-424.
  • Günlük-Senesen, G. (2002). Defence expenditures and its effect in Turkey: 1980–2001. Tesev, Istanbul
  • Hadri, K., & Kurozumi, E. (2012). A simple panel stationarity tests in the presence of cross- sectional dependence. Economics Letters, 115(1), 31–34.
  • Kalyoncu, H., & Yucel, F. (2006). An analytical approach on defense expenditure and economic growth: the case of Turkey and Greece. Journal of Economic Studies, 33(5), 336-343.
  • Karagol, E., & Palaz, S. (2004). Does defence expenditure deter economic growth in Turkey? A cointegration analysis. Defence and Peace Economics, 15(3) 289–298.
  • Karagol, E., (2006). The relationship between external debt, defence expenditures and GNP revisited: The case of Turkey. Defence and Peace Economics, 17, 47-57.
  • Kollias, C., & Paleologou, S.M. (2013). Guns, highways and economic growth in the United States. Econ. Model, 30, 449-455.
  • Kollias, C., Manolas, G. & Paleologou, S.Z. (2004). Defence expenditure and economic growth in the European Union: A causality analysis. Journal of Policy Modeling, 26(5), 553– 569.
  • Kollias, C., Naxakis, C., & Zaranga, L., (2004). Defence spending and growth in Cyprus: a causal analysis. Defence and Peace Economics, 15, 299-207
  • LaCivita, C.J. & Frederiksen, P.C. (1991). Defense spending and economic growth, an alternative approach to the causality issue. Journal of Development Economics, 35(1) 117–126.
  • Lai, C.N., Huang, B.N. & Yang, C.W. (2005). Defense spending and economic growth across the Taiwan Straits: A threshold regression model. Defence and Peace Economics, 16, 45–57
  • Lee, C. C. & Chen, S. T. (2007). Do defence expenditures spur GDP: A panel analysis from OECD and non-OECD countries. Defence and Peace Economics, 18(3), 265–280.
  • McCoskey, S., & Kao, C., (1998). A residual-based test of the null of cointegration in panel data. Econometric Reviews, 17(1), 57–84.
  • Pesaran, M. H. (2004). General diagnostic tests for cross section dependence in panels. Cambridge Working Papers in Economics No. 0435, Faculty of Economics, University of Cambridge.
  • Pesaran, M.H. & Yamagata, T. (2008). Testing slope homogeneity in large panels. Journal of Econometrics, 142(1), 50–93.
  • Pesaran, M.H., Ullah, A. & Yamagata, T. (2008). A bias-adjusted LM test of error cross-section independence. Econometrics Journal, 11(1), 105–127.
  • Pradhan, R. (2010). Modelling the nexus between defense spending and economic growth in Asean-5: Evidence from cointegrated panel analysis. African Journal of Political Science and International Relations, 4(8), 297–307.
  • Sezgin, S. (2001). An empirical analysis of Turkey’s defence-growth relationships with a multi- equation model (1956–1994). Defence and Peace Economics, 12(1), 69-86.
  • Smith, R., (1980). Military expenditure and investment in OECD countries 1954–73. Journal of Comparative Economics, 4, 19–32.
  • Sümer, K. K. (2005). Savunma harcamalarının ekonomik büyüme üzerine etkisinin incelenmesi. Güvenlik Stratejileri Dergisi, 1, 82-91.
  • Swamy, P.A.V.B. (1970). Efficient inference in a random coefficient regression model. Econometrica, 38(2), 311–323.
  • Westerlund, J., & Edgerton, D. (2007). A panel bootstrap cointegration test. Economics Letters, 97, 185–190.
  • Yılancı, V., & Özcan, B. (2010). Yapısal kırılmalar altında Türkiye için savunma harcamaları ile GSMH arasındaki ilişkinin analizi. CÜ İktisadi ve İdari Bilimler Dergisi, 11(1), 21- 33.
  • Yıldırım, J., Sezgin, S., & Ocal, N. (2005). Military expenditure and economic growth in middle eastern countries: A dynamic panel data analysis. Defence and Peace Economics, 16(4), 283-295

NATO ÜLKELERİNDE ASKERİ HARCAMALAR VE EKONOMİK BÜYÜME İLİŞKİSİ: YATAY KESİT BAĞIMLILIĞI ALTINDA PANEL VERİ ANALİZİ

Year 2016, Volume: 12 Issue: 28, 209 - 223, 01.04.2016
https://doi.org/10.17130/ijmeb.20162819853

Abstract

Askeri harcamalar ve ekonomik büyüme ilişkisi son yıllarda sıklıkla araştırılan bir konu olmakla birlikte ülkelerin askeri harcama düzeylerini genellikle rakip ve müttefik ülkelere göre ya da üyesi oldukları askeri ve siyasi uluslararası kuruluşlara göre belirledikleri olgusu göz ardı edilmektedir. Bu çalışmada, 14 NATO ülkesi için askeri harcamalar ve ekonomik büyüme ilişkisi yatay kesit bağımlılığını göz önünde bulunduran panel veri yöntemleri ile incelenmiştir. Değişkenler arasındaki nedensellik ilişkisi Dumitrescu and Hurlin 2012 tarafından geliştirilen panel nedensellik yöntemi aracılığıyla, ülkeler için ayrı ayrı nedensellik ilişkisi ise ardışık panel seçim yöntemiyle incelenmiştir. Çalışma sonucunda ABD için geri besleme hipotezinin; Kanada, İngiltere, İtalya ve Norveç için ise büyüme hipotezinin desteklendiği görülmüştür.

References

  • Atesoglu, H.S. (2002). Defense spending promotes aggregate output in the United States – Evidence from cointegration analysis. Defence and Peace Economics 13(1) 55–60.
  • Barro, R.J. (1990). Government spending in a simple model of endogenous growth. Journal of Political Economy, 98(5), 103–125.
  • Batchelor, P., Dunne, P., & Saal, D. (2000). Military spending and economic growth in South Africa. Defence and Peace Economics, 11(6), 553–571.
  • Benoit, E. (1973). Defense and economic growth in developing countries. Boston: D.C. Heath & Company.
  • Benoit, E. (1978). Growth and defense spending in developing countries. Economic Development and Cultural Change, 34, 176-196.
  • Biswas, R., & Ram, R. (1986). Military expenditure and economic growth in LDC: An augmented model and further evidence. Economic Development and Cultural Change, 34(2) 361–372.
  • Breusch, T. & Pagan, A. (1980). The LM test and its application to model specification in econometrics. Review of Economic Studies 47(1) 239–253.
  • Cappelen, A., Gleditsch, N.P. & Bjerkholt, O. (1984). Military spending and economic growth in the OECD countries. Journal of Peace Research, 21(4) 361–373.
  • Chang, T., Lee, C. C., Hung, K., & Lee, K, H, (2014). Does military spending really matter for economic growth in China and G7 countries: The roles of dependency and heterogeneity. Defence and Peace Economics, 1-15.
  • Chang, T., Lee,C.C, & Chu, H.P., (2015). Revisiting the defense–growth nexus in european countries. Defence and Peace Economics, 26(3) 341-356.
  • Chortareas, G. & Kapetanios, G., (2009). Getting PPP right: Identifying Mean-reverting real exchange rates in panels. Journal of Banking & Finance. 33(2), 390-404.
  • Chowdhury, A.R. (1991). A causal analysis of defence spending and economic growth. Journal of Conflict Resolution, 35(1) 80–97.
  • Cuaresma, J.C. & Reitschuler, G. (2003). A nonlinear defence-growth nexus? Evidence from the US economy. Defence and Peace Economics, 15(1) 71–82.
  • Deger, S. (1986). Economic development and defense expenditure. Economic Development and Cultural Change, 35(1), 179-196
  • Deger, S., & Smith, R. (1983). Military expenditure and growth in less developed countries. Journal of Conflict Resolution, 28(2) 335–353.
  • Dumitrescu, E.I., & Hurlin, C. (2012). Testing for Granger non-causality in heterogeneous panels. Economic Modelling, 29(4),1450-1460.
  • Dunne, P. & Vougas, D. (1999). Military spending and economic growth in South Africa. Journal of Conflict Resolution, 43(4) 521–537.
  • Dunne, P., Nikolaidou, E. & Vougas, D. (2001) Defence spending and economic growth: a causal analysis for Greece and Turkey. Defence and Peace Economics 12(1) 5–26.
  • Esen, S., Zeren, F. & Sımdı, H., (2015). CDS and stock market: Panel evidence under cross- section dependency. South-Eastern Europe Journal of Economics, 1, 31-46.
  • Feridun, M., Sawhney, B., & Shahbaz, M. (2011). The impact of military spending on economic growth: The case of north Cyprus. Defence and Peace Economics, 22(5) 555–562.
  • Görkem, H., & Serkan, I. (2008). Türkiye’de savunma harcamaları ve ekonomik büyüme arasındaki ilişki (1968-2006). Marmara Üniversitesi İİBF Dergisi, 25(2), 405-424.
  • Günlük-Senesen, G. (2002). Defence expenditures and its effect in Turkey: 1980–2001. Tesev, Istanbul
  • Hadri, K., & Kurozumi, E. (2012). A simple panel stationarity tests in the presence of cross- sectional dependence. Economics Letters, 115(1), 31–34.
  • Kalyoncu, H., & Yucel, F. (2006). An analytical approach on defense expenditure and economic growth: the case of Turkey and Greece. Journal of Economic Studies, 33(5), 336-343.
  • Karagol, E., & Palaz, S. (2004). Does defence expenditure deter economic growth in Turkey? A cointegration analysis. Defence and Peace Economics, 15(3) 289–298.
  • Karagol, E., (2006). The relationship between external debt, defence expenditures and GNP revisited: The case of Turkey. Defence and Peace Economics, 17, 47-57.
  • Kollias, C., & Paleologou, S.M. (2013). Guns, highways and economic growth in the United States. Econ. Model, 30, 449-455.
  • Kollias, C., Manolas, G. & Paleologou, S.Z. (2004). Defence expenditure and economic growth in the European Union: A causality analysis. Journal of Policy Modeling, 26(5), 553– 569.
  • Kollias, C., Naxakis, C., & Zaranga, L., (2004). Defence spending and growth in Cyprus: a causal analysis. Defence and Peace Economics, 15, 299-207
  • LaCivita, C.J. & Frederiksen, P.C. (1991). Defense spending and economic growth, an alternative approach to the causality issue. Journal of Development Economics, 35(1) 117–126.
  • Lai, C.N., Huang, B.N. & Yang, C.W. (2005). Defense spending and economic growth across the Taiwan Straits: A threshold regression model. Defence and Peace Economics, 16, 45–57
  • Lee, C. C. & Chen, S. T. (2007). Do defence expenditures spur GDP: A panel analysis from OECD and non-OECD countries. Defence and Peace Economics, 18(3), 265–280.
  • McCoskey, S., & Kao, C., (1998). A residual-based test of the null of cointegration in panel data. Econometric Reviews, 17(1), 57–84.
  • Pesaran, M. H. (2004). General diagnostic tests for cross section dependence in panels. Cambridge Working Papers in Economics No. 0435, Faculty of Economics, University of Cambridge.
  • Pesaran, M.H. & Yamagata, T. (2008). Testing slope homogeneity in large panels. Journal of Econometrics, 142(1), 50–93.
  • Pesaran, M.H., Ullah, A. & Yamagata, T. (2008). A bias-adjusted LM test of error cross-section independence. Econometrics Journal, 11(1), 105–127.
  • Pradhan, R. (2010). Modelling the nexus between defense spending and economic growth in Asean-5: Evidence from cointegrated panel analysis. African Journal of Political Science and International Relations, 4(8), 297–307.
  • Sezgin, S. (2001). An empirical analysis of Turkey’s defence-growth relationships with a multi- equation model (1956–1994). Defence and Peace Economics, 12(1), 69-86.
  • Smith, R., (1980). Military expenditure and investment in OECD countries 1954–73. Journal of Comparative Economics, 4, 19–32.
  • Sümer, K. K. (2005). Savunma harcamalarının ekonomik büyüme üzerine etkisinin incelenmesi. Güvenlik Stratejileri Dergisi, 1, 82-91.
  • Swamy, P.A.V.B. (1970). Efficient inference in a random coefficient regression model. Econometrica, 38(2), 311–323.
  • Westerlund, J., & Edgerton, D. (2007). A panel bootstrap cointegration test. Economics Letters, 97, 185–190.
  • Yılancı, V., & Özcan, B. (2010). Yapısal kırılmalar altında Türkiye için savunma harcamaları ile GSMH arasındaki ilişkinin analizi. CÜ İktisadi ve İdari Bilimler Dergisi, 11(1), 21- 33.
  • Yıldırım, J., Sezgin, S., & Ocal, N. (2005). Military expenditure and economic growth in middle eastern countries: A dynamic panel data analysis. Defence and Peace Economics, 16(4), 283-295
There are 44 citations in total.

Details

Primary Language Turkish
Journal Section Research Article
Authors

Mehmet Akif Destek This is me

Publication Date April 1, 2016
Published in Issue Year 2016 Volume: 12 Issue: 28

Cite

APA Destek, M. A. (2016). NATO ÜLKELERİNDE ASKERİ HARCAMALAR VE EKONOMİK BÜYÜME İLİŞKİSİ: YATAY KESİT BAĞIMLILIĞI ALTINDA PANEL VERİ ANALİZİ. Uluslararası Yönetim İktisat Ve İşletme Dergisi, 12(28), 209-223. https://doi.org/10.17130/ijmeb.20162819853