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The Impact of Defense Expenditure on Economic Growth

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  • Obreja Brasoveanu, Laura

    (University of Economic Studies, Bucharest, Finance Department)

Abstract

The goal of this paper is to analyze the relationship between defense expenditures and economic growth in Romania, trying to find out the existence, direction and intensity of this connection. The methods which I used are cluster analysis, quintile analysis, regression technique and Granger causality. The results suggest that in Romania there is a negative correlation. A potential cause of the negative effect of defense expenditures on economic growth in Romania is the high proportion of the spending on equipment and other operational spending. Also I have considered the implications of the budgetary restriction – the limited resources might be given priority for other programs.

Suggested Citation

  • Obreja Brasoveanu, Laura, 2010. "The Impact of Defense Expenditure on Economic Growth," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 148-167, December.
    • Handle: RePEc:rjr:romjef:v::y:2010:i:4:p:148-167
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    References listed on IDEAS

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    1. Jesús Crespo Cuaresma & Gerhard Reitschuler, 2006. "‘Guns Or Butter?’ Revisited: Robustness And Nonlinearity Issues In The Defense–Growth Nexus," Scottish Journal of Political Economy, Scottish Economic Society, vol. 53(4), pages 523-541, September.
    2. Abu-Bader, Suleiman & Abu-Qarn, Aamer S., 2003. "Government expenditures, military spending and economic growth: causality evidence from Egypt, Israel, and Syria," Journal of Policy Modeling, Elsevier, vol. 25(6-7), pages 567-583, September.
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    5. Habibullah, M.S. & Law, Siong-Hook & Dayang-Afizzah, A.M., 2008. "Defense spending and economic growth in Asian economies: A panel error-correction approach," MPRA Paper 12105, University Library of Munich, Germany.
    6. Jere H. Behrman, 1976. "Economic Growth," NBER Chapters, in: Foreign Trade Regimes and Economic Development: Chile, pages 268-292, National Bureau of Economic Research, Inc.
    7. Laura Obreja Brasoveanu & Iulian Brasoveanu, 2008. "The Correlation between Fiscal Policy and Economic Growth," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 7(7(524)), pages 19-26, July.
    8. Michael Gerace, 2002. "US Military Expenditures and Economic Growth: Some Evidence from Spectral Methods," Defence and Peace Economics, Taylor & Francis Journals, vol. 13(1), pages 1-11.
    9. Herschel I. Grossman & Juan Mendoza, 2001. "Butter and guns: Complementarity between economic and military competition," Economics of Governance, Springer, vol. 2(1), pages 25-33, March.
    10. F. Gerard Adams & Jere R. Behrman & Michael Boldin, 1991. "Government Expenditures, Defense, and Economic Growth in the Ldcs: A Revised Perspective," Conflict Management and Peace Science, Peace Science Society (International), vol. 11(2), pages 19-35, February.
    11. Niloy Bose & M. Emranul Haque & Denise R. Osborn, 2007. "Public Expenditure And Economic Growth: A Disaggregated Analysis For Developing Countries," Manchester School, University of Manchester, vol. 75(5), pages 533-556, September.
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    Cited by:

    1. Ran Tao & Oana Ramona Glonț & Zheng-Zheng Li & Oana Ramona Lobonț & Adina Alexandra Guzun, 2020. "New Evidence for Romania Regarding Dynamic Causality between Military Expenditure and Sustainable Economic Growth," Sustainability, MDPI, vol. 12(12), pages 1-13, June.
    2. Innocent.U. Duru & Millicent Adanne Eze & Bartholomew.O.N. Okafor & Abubakar Yusuf & Lawrence.O. Ede & Abubakar Sadiq Saleh, 2021. "Military Outlay and Economic Growth: The Scenarios of Lake Chad Basin Countries of the Republic of Chad and Nigeria," Growth, Asian Online Journal Publishing Group, vol. 8(1), pages 12-26.

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    More about this item

    Keywords

    fiscal policy; public expenditures; defense expenditures; economic growth; budget constraint;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
    • H6 - Public Economics - - National Budget, Deficit, and Debt

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