MILITARY EXPENDITURE AND ECONOMIC GROWTH IN MIDDLE EASTERN COUNTRIES AND TURKEY: A NON-LINEAR PANEL DATA APPROACH


KARADAM D. Y. , YILDIRIM ÖCAL J., ÖCAL N.

DEFENCE AND PEACE ECONOMICS, vol.28, no.6, pp.719-730, 2017 (Peer-Reviewed Journal) identifier identifier

  • Publication Type: Article / Article
  • Volume: 28 Issue: 6
  • Publication Date: 2017
  • Doi Number: 10.1080/10242694.2016.1195573
  • Journal Name: DEFENCE AND PEACE ECONOMICS
  • Journal Indexes: Social Sciences Citation Index, Scopus
  • Page Numbers: pp.719-730
  • Keywords: Military expenditure, Economic growth, Non-linear panel data models, Middle Eastern countries, Turkey, CAUSAL-ANALYSIS, DEFENSE EXPENDITURES, PEACE-DIVIDEND, UNITED-STATES, TIME-SERIES, CIVIL-WARS, MODELS, NEXUS

Abstract

The economic growth effects of military expenditure have been the subject of a large literature in defence economics. Theories on the economic impacts of military expenditure greatly differ and include arguments that they either enhance economic growth or crowd out productive investments. Empirical literature on defence expenditure and economic growth nexus generally employs linear specifications to investigate the impact of defence expenditures on economic growth. Although it is now well established that many economic variables may have a non-linear data-generating mechanism, it seems that this reality has long been neglected in empirical work on defence-growth nexus. This paper attempts to fill this gap by employing non-linear panel data models to examine the effects of military expenditures on economic growth for Middle Eastern countries and Turkey, for the time period 1988-2012. Results show that the effect of military expenditure on economic growth is nonlinear such that the state of the economy actually determines the effect of the former on the latter. This is important not only in showing asymmetric relationship between these variables but also in revealing the reasons of mixed results of earlier literature.