THE EFFECT OF MILITARY EXPENDITURE ON STOCK MARKET DEVELOPMENT: PANEL EVIDENCE FROM SYSTEM GMM ESTIMATES

摘要

This paper examines the impact of military expenditure on stock market development in 36 countries over the period 1989-2010. Within a panel framework, the system GMM estimates is utilised to test the relationship with an array of control variables. We augment the traditional measure of military expenditure-military burden, with a newly constructed comprehensive index - Global Militarisation Index. Overall, the results show that military spending has a negative and significant effect on stock market performance in the selected countries.