THE RELATIONSHIP BETWEEN DEFENSE EXPENDITURE AND ECONOMIC GROWTH: A PANEL DATA ANALYSIS FOR TURKEY AND SELECTED COUNTRIES

Year 2020, Volume: 12 Issue: 22, 86 - 102, 29.05.2020

Mehmet Ali Polat

https://doi.org/10.20990/kilisiibfakademik.603555

Cited By: 2

Abstract

In this study, the relationships between defense
expenditure and economic growth are analyzed by panel data analysis methods by
using the data of 1992-2017 periods for 15 countries with the highest defense
spending in 2017. The stationarity of the series is examined by LLC and IPS
panel unit root tests and the series are determined to be I(1). Cointegration
relationships between series is examined by Pedroni panel cointegration test
and it is determined that the series are cointegrated. Long and short-term
analyzes are performed by PDOLS method, and 1% increase in defense expenditures
is estimated to incline the national income by 1.05% in average, and this
effect is slightly lower in the short term. Similarly; 1% increase in national
income is found to ascend defense expenditure by 0.89% and this effect is also
lower in the short term. Error correction mechanism of the models operates.
Causality relationships between series is examined by VECM method and it is
determined that a causality exists from national income to defense expenditures
only in the long term while it exists both in the short term and in the long
term from defense expenditure to national income.

Keywords

Defense Expenditure, Economic Growth, Panel Data Analysis

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