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Does Defence Spending Stimulate Economic Growth In India? A Revisit

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  • Aviral Kumar Tiwari
  • Muhammad Shahbaz

Abstract

This study reinvestigates the effect of defence spending on economic growth using Zivot and Andrews and Lee and Strazicich, structural unit root tests and the autoregressive distributed lag bounds testing approach to cointegration in augmented version of Keynesian model for India. Study confirmed long run relationship among variables studied show that economic growth is positively affected by defence spending (also negative impact after a threshold point), investment and trade openness while negatively by interest rate. Granger causality analysis revealed bidirectional causal relationship between defence spending and economic growth as probed by variance decomposition approach.

Suggested Citation

  • Aviral Kumar Tiwari & Muhammad Shahbaz, 2013. "Does Defence Spending Stimulate Economic Growth In India? A Revisit," Defence and Peace Economics, Taylor & Francis Journals, vol. 24(4), pages 371-395, August.
    • Handle: RePEc:taf:defpea:v:24:y:2013:i:4:p:371-395
    DOI: 10.1080/10242694.2012.710814
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    References listed on IDEAS

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