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The Defence Spending-External Debt Nexus In Ethiopia

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  • Yemane Wolde-Rufael

Abstract

The aim of this paper is to examine the impact of defence spending and income on the evolution of Ethiopia's external debt over the period 1970-2005. Using the bounds test approach to cointegration and Granger causality tests, we find a long run and a causal relationship between external debt, defence spending and income. Defence spending had a positive and a significant impact on the stock of external debt while income had a negative and a statistically significant impact on external debt. Our findings suggest that an increase in defence spending contributes to the accumulation of Ethiopia's external debt, while an increase in economic growth helps Ethiopia to reduce its external debt.

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  • Yemane Wolde-Rufael, 2009. "The Defence Spending-External Debt Nexus In Ethiopia," Defence and Peace Economics, Taylor & Francis Journals, vol. 20(5), pages 423-436, October.
    • Handle: RePEc:taf:defpea:v:20:y:2009:i:5:p:423-436
    DOI: 10.1080/03066150902868171
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    Cited by:

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    7. 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.
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