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Revisit causal nexus between military spending and debt: A panel causality test

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  • Zhang, Xiaoyan
  • Chang, Tsangyao
  • Su, Chi-Wei
  • Wolde-Rufael, Yemane

Abstract

This study revisits the causal relationship between military spending and debt burden in 11 OECD countries via a panel causality analysis that accounts for both cross-sectional dependence and heterogeneity across countries. Our empirical results indicate unidirectional causality from military spending to debt burden for Japan, Portugal, and the US; one-way causality from debt burden to military spending for both Canada and the UK; bidirectional causality for Spain; and for the rest of countries, we do not find any relationship between military spending and debt burden. The empirical evidence does not provide consistent results regarding the causal relationship between military spending and debt burden in these 11 OECD countries.

Suggested Citation

  • Zhang, Xiaoyan & Chang, Tsangyao & Su, Chi-Wei & Wolde-Rufael, Yemane, 2016. "Revisit causal nexus between military spending and debt: A panel causality test," Economic Modelling, Elsevier, vol. 52(PB), pages 939-944.
    • Handle: RePEc:eee:ecmode:v:52:y:2016:i:pb:p:939-944
    DOI: 10.1016/j.econmod.2015.10.032
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