Nexus between defence spending, economic growth and development: evidence from a disaggregated panel data analysis
- PDF / 1,445,201 Bytes
- 43 Pages / 439.37 x 666.142 pts Page_size
- 40 Downloads / 204 Views
Nexus between defence spending, economic growth and development: evidence from a disaggregated panel data analysis Charles Shaaba Saba1 · Nicholas Ngepah1 Received: 9 June 2020 / Accepted: 19 November 2020 © The Author(s), under exclusive licence to Springer Science+Business Media, LLC part of Springer Nature 2020
Abstract This study investigates the causal effect relationship between defence spending, economic growth and development in three regions for the period 1990–2018. It further estimates the trivariate impacts of defence spending, growth and development in three regions. To measure growth, we used real gross domestic product as the proxy, while economic development was measured by the Human Development Index. The empirical results suggest the existence of a bidirectional long-run relationship between defence spending, economic growth and development in the entire sample and the three regions of sub-Saharan Africa, the Middle East and North Africa, and Latin America and the Caribbean countries. The causality results reveal that there is feedback causality between defence spending, economic growth and development. There is thus a need to promote holistic policies to reduce the defence spending necessary for the enhancement of inclusive economic growth and development in these three regions. A decrease in defence spending in the three regions will encourage aggregate output and the standard of living to increase, and move simultaneously in the same direction. Keywords Defence spending · Economic growth and development · Panel cointegration · Panel causality · Panel vector autoregressive (PVAR) JEL Classification C33 · H56 · O11 · O53 · O54 · O55
* Charles Shaaba Saba [email protected]; [email protected]
Nicholas Ngepah [email protected]; [email protected]
1
School of Economics, College of Business and Economics, Auckland Park Kingsway Campus, University of Johannesburg, PO Box 524, Auckland Park, Johannesburg, South Africa
13
Vol.:(0123456789)
Economic Change and Restructuring
1 Introduction The non-excludability and non-rivalry status of defence makes it a public good (Rosen 1999). That is why economic theories such as the neoclassical, Keynesian, institutional and Marxist theories, intuitively justify government intervention in the economy as a defence provider. The empirical literature has recently devoted increasing attention to the economic impact of defence spending in developing countries (Dunne et al. 2002). Nevertheless, studies focusing on Sub-Saharan Africa (SSA), the Middle East and North Africa (MENA), and Latin America and the Caribbean (LAC) regions are few, although these three regions deserve more attention due to their government institutions and their organizations’ quest for security, which is needed for their economic and investment activities. Empirical studies on the causal relationship between defence spending (henceforth, DEF) and economic growth occupy a substantial portion of the defence, peace, and economic literature. However, debate on the nature/direc
Data Loading...
