The Relationship Between Military Spending and Black Market Premium in Greece: An ARDL Approach
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The Relationship Between Military Spending and Black Market Premium in Greece: An ARDL Approach Alper Aslan
Published online: 17 October 2012 Ó Springer-Verlag Wien 2012
Abstract Recently, there are a few empirical studies relating to the military spending and other macro variables such as real exchange rate, unemployment rates, investment rates, budget, and inflation rates. We examine the relationship between military spending and black market premium, in the Greece using the autoregressive distributed lag approach for the time period 1954–1998. Our results implied that higher military spending leads to higher black market premium and we concluded that while military spending does not Granger cause black market premium in the short run, black market premium does Granger cause military spending in the short run. When we examine the long-run results, ELC model implies that almost 30 % of the disequilibrium of the previous year’s shocks adjusts back to the long run equilibrium. Keywords
Military Spending Black Market Premium ARDL Greece
JEL Classification
H56 C22
Introduction The relationships between military spending and the economy have already been discussed at length. Among the mostly debated issues may be the connection between military spending and economic growth, which has been studied extensively since the seminal work of Benoit (1973, 1978). While a large body of the literature focuses on the relationships between military spending and economic growth, the empirical findings on the effect of higher military spending on economic growth are rather mixed. A. Aslan (&) Department of Economics, Nevs¸ ehir University, Nevsehir, Turkey e-mail: [email protected]
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While a group of scholars (Benoit 1973, 1978; Kennedy 1974; Atesoglu and Mueller 1990; Mueller and Atesoglu 1993; Sezgin 1997, 2000 and Yildirim and Sezgin 2002) argued that defense spending is positively related to economic growth. Another group of scholars claims that defense spending hampers economic growth because of its opportunity costs (Frederiksen and Looney 1983; Dommen and Maizels 1988; Jeong 2000; Dunne and Nikolaidou 2001). In contrast to the above groups, the third set of studies found some mixed and or insignificant results; Biswas and Ram 1986, Alexander 1990; Mintz and Huang 1991, Kollias and Makrydakis 2000). Recently there are a few empirical studies relating to the military expenditures and other macro variables such as real exchange rate (Bergstrand 1992), the black market premium (Bahmani-Oskooee and Goswami 2006), unemployment rates (Kinsella 1990; Payne and Ross 1992; Yildirim and Sezgin 2003; Huang and Kao 2005 and Tang et al. 2009), investment rates (Smith 1977), inflation (Nourzad 1987) and government budget, total deficit, the GNP growth rates, inflation rates, and ¨ zsoy, 2008). government budget deficit (O This paper is an attempt to broaden the scope of this issue by examining the relationship between military expenditure and black market premium for the time period 1954–1998 in Greec
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