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Researcher Asseery (1996) provided a robust evidence for Iraq that there is long run causality between military expenditure and economic growth and the economic growth is heavily dependent on military expenditure, he provided his empirical evidence using Cointegration analysis and ganger causality test.In 19 (Benoit 1973, 1978) proved that military spending increases literacy rate, medical facilities, employment opportunities, scientific and technological innovations.
Atesoglu (2002) also used a Cointegration analysis for united states and gained positive and quantitative effect of military expenditure on economic growth. 2004b) examined the relationship between military expenditure and economic growth applying causality approach and acquired bi-directional causality between military spending and growth from 1964 to 1999. 2004a) observed the relationship between military spending and economic growth among EU 15 countries using Cointegration analysis and causality test for the period of 1961–2000, almost all cases they got positive causality from economic growth to military spending and not vice-versa.
They also concluded that the EU countries decide the military expenditure considering their economic status.
To ensure the robustness of the studies we included possible maximum number of observations for each country.
The data of GDP growth rate is collected from the World Bank Data; (June 10, 2018) and the data of Military expenditure as a percent of GDP are collected from Stockholm International Peace Research Institute (SIPRI-2018).
Empirical studies have been done using cointegration analysis and causality test to justify the relationship and causality of the variables.
Interestingly, study obtained positive log-run relation, no short run relationship and unidirectional long run causality in every cases, but for different degrees of relationship.So the aim of this study is to justify the relationship between military expenditure and economic growth for three neighbor countries that have to maintain a great amount of military budget as they are geographically correlated with one another.As military expenditure is an integral part of government expenditure researchers around the world were much curious to investigate the contribution of the military spending in the economy and this curiosity will be continued.The authors (Khalid and Mustapha 2014) got positive relationship for India using ARDL model and ganger causality test, they found that 1% increase in military expenditure increases real GDP by 0.04% in short run but in long run the correlations are inconclusive.Chen (1993) conducted an empirical econometric analysis based on a Barro-style growth model for china, his findings support the existence of a single long-run equilibrium relationship between the variables.Obtained results are robust and passed necessary diagnostic tests significantly.Over the past decades the study of relationship between military expenditure and GDP growth has received extensive amount of attention of the researchers and policy makers around the world.Principally, two variables are used in this analysis for three countries.We used the data of GDP growth as the indicator of economic growth and data of military expenditure as percentage of GDP as the value of military expenditure.Moreover, the idea that it crowd out private investment is not obvious.In recent time there are some studies have taken place in South Asia which obtained positive growth effect. 2013) got unidirectional causality from military spending to economic growth for Pakistan using the autoregressive distributive lag bounds testing approach to Cointegration.