Causal Analysis of Economic Growth and Military Expenditure

摘要

The purpose of this paper is to analyze the long-term temporal series of military expenditure and economic growth and to prove the existence of the above theoretical links on realistic data by means of structural analysis (Granger causality) in VAR models and in VECM models for cointegrated time series. In theory it is possible to distinguish 4 types of links between military expenditure and economic growth: a mutual link between anticipated variables, a link showing influence of military expenditure on economic growth, a link showing influence of economic growth on the level of military expenditure, non-existence of any links between anticipated variables. SIPRI and OECD (Belgium, Denmark, France, German, Greece, Italy, the Netherlands, Portugal, Spain, and the UK) database were used to analyze the links between military expenditure and economic growth.