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Arms Race Between Turkey And Greece: A Threshold Cointegration Analysis

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  • Nadir Ocal
  • Julide Yildirim

Abstract

The ongoing Turkish-Greek antagonism has triggered the interest of defense economists to investigate the various aspects of the arms race between Turkey and Greece. However, empirical studies examining the long-run relationship between the military expenditures of the two countries offer little evidence in favor of such an interaction. This paper attributes the poor results of the previous literature to the adherence to linear cointegration techniques and argues that if the adjustment towards long-run equilibrium is asymmetric, nonlinear co-integration models should be employed. Accordingly, this paper considers threshold autoregressive (TAR) and momentum threshold autoregressive (M-TAR) models as alternative adjustment processes for the cointegration relationship, following Enders and Siklos (2001). The results indicate that the relationship between the variables can be characterized by a threshold cointegration specification following an M-TAR type adjustment process.

Suggested Citation

  • Nadir Ocal & Julide Yildirim, 2009. "Arms Race Between Turkey And Greece: A Threshold Cointegration Analysis," Defence and Peace Economics, Taylor & Francis Journals, vol. 20(2), pages 123-129.
    • Handle: RePEc:taf:defpea:v:20:y:2009:i:2:p:123-129
    DOI: 10.1080/10242690801962254
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    References listed on IDEAS

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    1. Hansen, Bruce E, 1999. "Testing for Linearity," Journal of Economic Surveys, Wiley Blackwell, vol. 13(5), pages 551-576, December.
    2. Bruce Hansen, 1999. "Testing for Linearity," Journal of Economic Surveys, Wiley Blackwell, vol. 13(5), pages 551-576, December.
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    4. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    5. Jurgen Brauer, 2002. "Survey and Review of the Defense Economics Literature on Greece and Turkey: What Have We Learned?," Defence and Peace Economics, Taylor & Francis Journals, vol. 13(2), pages 85-107.
    6. Dunne J. Paul & Nikolaidou Eftychia & Smith Ron P., 2005. "Is there an Arms Race between Greece and Turkey?," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 11(2), pages 1-37, November.
    7. Christos Kollias & Suzanna-Maria Paleologou, 2002. "Is there a Greek-Turkish arms race? Some further empirical results from causality tests," Defence and Peace Economics, Taylor & Francis Journals, vol. 13(4), pages 321-328.
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    Cited by:

    1. Dimitrios PAPARAS & Christian RICHTER & Alexandros PAPARAS, 2016. "Military Spending and Economic Growth in Greece and the Arms Race between Greece and Turkey," Journal of Economics Library, KSP Journals, vol. 3(1), pages 38-56, March.
    2. Christos Kollias & Suzanna-Maria Paleologou & Andreas Stergiou, 2016. "Military expenditure in Greece: Security challenges and economic constraints," Economics of Peace and Security Journal, EPS Publishing, vol. 11(1), pages 28-34, April.

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