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Modelling the asymmetric impact of defence spending on economic growth

Author

Listed:
  • Muhammad Ahad
  • Adeel Ahmad Dar

Abstract

Purpose - The purpose of this paper is to examine the non-linear impact of defence spending on economic growth for the USA, the UK and Russia by using quarterly frequency from 1992 to 2014. Design/methodology/approach - The unit root property is tested by ADF and PP unit root test. Further, BDS test is applied to test the linear independence. To verify the results of BDS test, we apply short and long-run symmetry test. The cointegration non-linear relationship is examined by NARDL approach. Further, Multipliers predict the speed of adjustments by considering the nonlinearity. Findings - The short and long-run symmetry test confirms the existence of asymmetry in all countries. Further, asymmetric cointegration is confirmed through Wald statistics of Pesaran and Banerjee for all countries. The long-run asymmetric coefficient predicts negative and significant impact of defence spending on economic growth for the USA and the UK, but, these impacts were positive and significant in the case of Russia. The multiplier effect of defence spending on economic growth confirms the findings of NARDL model. Originality/value - This study contributes in existing literature by applying newly developed non-linear ARDL approach, including a Wald test for long and short-run symmetry, asymmetric cointegration and asymmetric long run parameters in case of the USA, the UK and Russia.

Suggested Citation

  • Muhammad Ahad & Adeel Ahmad Dar, 2017. "Modelling the asymmetric impact of defence spending on economic growth," Journal of Economic and Administrative Sciences, Emerald Group Publishing Limited, vol. 33(2), pages 131-149, November.
    • Handle: RePEc:eme:jeaspp:jeas-03-2017-0010
    DOI: 10.1108/JEAS-03-2017-0010
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    Citations

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    Cited by:

    1. Nikeel Kumar & Ronald Ravinesh Kumar & Radika Kumar & Peter Josef Stauvermann, 2020. "Is the tourism–growth relationship asymmetric in the Cook Islands? Evidence from NARDL cointegration and causality tests," Tourism Economics, , vol. 26(4), pages 658-681, June.
    2. Stamegna, Marco & Bonaiuti, Chiara & Maranzano, Paolo & Pianta, Mario, 2024. "The economic impact of arms spending in Germany, Italy, and Spain," MPRA Paper 120608, University Library of Munich, Germany.
    3. Hinaunye Eita & Mduduzi Biyase & Thomas Udimal & Talent Zwane, 2022. "Does military spending affect inequality in South Africa? A revisit," Economics Working Papers edwrg-03-2022, College of Business and Economics, University of Johannesburg, South Africa, revised 2022.

    More about this item

    Keywords

    Economic growth; NARDL; Asymmetries; Defence spending; Multipliers; N4; H5; O11;
    All these keywords.

    JEL classification:

    • N4 - Economic History - - Government, War, Law, International Relations, and Regulation
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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