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Military spending and budget deficits: the impact of US military spending on public debt in Europe (1988–2013)

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  • Raul Caruso
  • Marco Di Domizio

Abstract

The aim of this paper is to study the relationship between military spending and sovereign debt in a panel of 13 European countries. In particular, under the assumption of the interdependence of military spending between US and European countries, we analyse whether US military spending affected European sovereign debt in the period 1988–2013. The empirical estimation is based on different steps: (i) a unit root test; (ii) an Arellano–Bond panel estimation and a linear fixed effect model; and (iii) a FMOLS estimation to highlight the long run relationship between debt and relevant variables. General results highlight that debt burden of European countries is: (1) positively associated with US military burden and (2) negatively associated with average military burden of other European countries.

Suggested Citation

  • Raul Caruso & Marco Di Domizio, 2017. "Military spending and budget deficits: the impact of US military spending on public debt in Europe (1988–2013)," Defence and Peace Economics, Taylor & Francis Journals, vol. 28(5), pages 534-549, September.
    • Handle: RePEc:taf:defpea:v:28:y:2017:i:5:p:534-549
    DOI: 10.1080/10242694.2016.1228259
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    References listed on IDEAS

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    1. Abdullahi D. Ahmed, 2012. "Debt Burden, Military Spending And Growth In Sub-Saharan Africa: A Dynamic Panel Data Analysis," Defence and Peace Economics, Taylor & Francis Journals, vol. 23(5), pages 485-506, October.
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    Cited by:

    1. Amarda Kadia, 2020. "Corruption and Economic Growth in the Balkan Countries," European Journal of Economics and Business Studies Articles, Revistia Research and Publishing, vol. 6, ejes_v6_i.
    2. Antonella Biscione & Raul Caruso, 2021. "Military Expenditures and Income Inequality Evidence from a Panel of Transition Countries (1990-2015)," Defence and Peace Economics, Taylor & Francis Journals, vol. 32(1), pages 46-67, January.
    3. Caruso Raul & Antonella Biscione, 2022. "Militarization and Income Inequality in European Countries (2000–2017)," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 28(3), pages 267-285, September.
    4. Gitana Dudzevičiūtė & Vida Česnuitytė & Dalia Prakapienė, 2021. "Defence Expenditure–Government Debt Nexus in the Context of Sustainability in Selected Small European Union Countries," Sustainability, MDPI, vol. 13(12), pages 1-18, June.
    5. Caruso Raul & Antonella Biscione, 2022. "Militarization and Income Inequality in European Countries (2000–2017)," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 28(3), pages 267-285, September.
    6. Jacques Fontanel, 2019. "The military budget, a less and less significant indicator of the useful national defense effort," Working Papers hal-02422300, HAL.
    7. Joseph Mawejje & Nicholas M. Odhiambo, 2020. "The determinants of fiscal deficits: a survey of literature," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 67(3), pages 403-417, September.
    8. Pempetzoglou Maria, 2021. "A Literature Survey on Defense Expenditures – External Debt Nexus," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 27(1), pages 119-141, February.

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