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Defence expenditure and economic growth: A case study of Sri Lanka using causality analysis

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  • Selvanathan, Saroja
  • Selvanathan, Eliyathamby A

Abstract

Many countries allocate a significant amount of their income to defence related expenses, especially when involved in internal or external military conflicts. Political stability in a country is a key ingredient for attracting foreign and local investors and hence for economic growth. This paper analyses the relationship between defence expenditure and economic growth in Sri Lanka using data for the period 1975–2013 applying the latest developments in time series analysis. Interestingly, the results show that, in Sri Lanka, defence expenditure causes economic growth. There is no causal effect from economic growth to defence expenditure as generally expected. This result is unique as Sri Lanka went through 30 years of civil war which ended in 2009, which resulted in the loss of tens of thousands of civilian lives and cost several billions of dollars in annual defence expenditure throughout the war years.

Suggested Citation

  • Selvanathan, Saroja & Selvanathan, Eliyathamby A, 2014. "Defence expenditure and economic growth: A case study of Sri Lanka using causality analysis," International Journal of Development and Conflict, Gokhale Institute of Politics and Economics, vol. 4(2), pages 69-76.
    • Handle: RePEc:gok:ijdcv1:v:4:y:2014:i:2:p:69-76
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    References listed on IDEAS

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    1. Chen, Pei-Fen & Lee, Chien-Chiang & Chiu, Yi-Bin, 2014. "The nexus between defense expenditure and economic growth: New global evidence," Economic Modelling, Elsevier, vol. 36(C), pages 474-483.
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    3. Na Hou & Bo Chen, 2013. "Military Expenditure And Economic Growth In Developing Countries: Evidence From System Gmm Estimates," Defence and Peace Economics, Taylor & Francis Journals, vol. 24(3), pages 183-193, June.
    4. Christos Kollias & Nikolaos Mylonidis & Suzanna-Maria Paleologou, 2007. "A Panel Data Analysis Of The Nexus Between Defence Spending And Growth In The European Union: A Reply," Defence and Peace Economics, Taylor & Francis Journals, vol. 18(6), pages 581-583.
    5. Christos Kollias & Nikolaos Mylonidis & Suzanna-Maria Paleologou, 2007. "A Panel Data Analysis Of The Nexus Between Defence Spending And Growth In The European Union," Defence and Peace Economics, Taylor & Francis Journals, vol. 18(1), pages 75-85.
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    Cited by:

    1. Sharma, Sapana & Karol, Sanju, 2022. "India’s Defence Expenditure and Economic Growth," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 75(1), pages 51-74.
    2. S Tharshan & W L M A Liyanage & P G K Nilanka & E A Selvanathan & M Jayasinghe and S Selvanathan, 2019. "The Impact of Sectoral Government Expenditure on Economic Growth: Evidence from Sri Lanka," Discussion Papers in Economics economics:201902, Griffith University, Department of Accounting, Finance and Economics.
    3. Ally, Zawadi & Kingu, John, 2024. "The Dynamics of Political Stability and Military Expenditure on Economic Growth: Insights from Tanzania," African Journal of Economic Review, African Journal of Economic Review, vol. 12(3), September.
    4. Selvanathan, Eliyathamby A. & Selvanathan, Saroja & Jayasinghe, Maneka Savithri, 2021. "Revisiting Wagner’s and Keynesian’s propositions and the relationship between sectoral government expenditure and economic growth," Economic Analysis and Policy, Elsevier, vol. 71(C), pages 355-370.
    5. Shweta Singh, 2017. "Re-thinking the ‘Normative’ in United Nations Security Council Resolution 1325: Perspectives from Sri Lanka," Journal of Asian Security and International Affairs, , vol. 4(2), pages 219-238, August.
    6. Shakoor Ahmed & Khorshed Alam & Afzalur Rashid & Jeff Gow, 2020. "Militarisation, Energy Consumption, CO2 Emissions and Economic Growth in Myanmar," Defence and Peace Economics, Taylor & Francis Journals, vol. 31(6), pages 615-641, August.

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