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Does military expenditure increase external debt? Evidence from Asia

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  • Muhammad Azam
  • Yi Feng

Abstract

This article empirically explores the effect of military spending on external debt, using a sample of ten Asian countries over the years from 1990 to 2011. The Hausman’s test suggests that the random-effects model is preferable; however, both random-effects and fixed-effects models are used in this research. The empirical results show that the effect of military spending on external debt is positive, while the effects of foreign exchange reserves and of economic growth on external debt are negative. For developing countries caught in security dilemma, military expenditure often requires an increase in external debt, which may affect economic development negatively.

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  • Muhammad Azam & Yi Feng, 2017. "Does military expenditure increase external debt? Evidence from Asia," Defence and Peace Economics, Taylor & Francis Journals, vol. 28(5), pages 550-567, September.
    • Handle: RePEc:taf:defpea:v:28:y:2017:i:5:p:550-567
    DOI: 10.1080/10242694.2015.1072371
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    References listed on IDEAS

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    1. Safia Shabbir, 2013. "Does External Debt Affect Economic Growth: Evidence from Developing Countries," SBP Working Paper Series 63, State Bank of Pakistan, Research Department.
    2. Krishna Chaitanya Vadlamannati & K K Shakya Lahiru Pathmalal, 2008. "Exploring The Relationship Between Military Spending & Human Rights Performance In South Asia," William Davidson Institute Working Papers Series wp941, William Davidson Institute at the University of Michigan.
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    Cited by:

    1. Shujaat Abbas & Shahida Wizarat & Sadia Mansoor, 2020. "External Debt Distress in South Asia: Evidence from Panel Data Analysis," South Asian Journal of Macroeconomics and Public Finance, , vol. 9(2), pages 221-236, December.
    2. Minhaj ud-Din & Muhammad Azam Khan & Muhammad Tariq, 2020. "External Debt - Blessing or Curse: Empirical Evidence from Pakistan," International Journal of Economics and Financial Issues, Econjournals, vol. 10(4), pages 235-246.
    3. Pata, Ugur Korkut & Destek, Mehmet Akif & Manga, Muge & Cengiz, Orhan, 2022. "Militarization of NATO Countries Sparks Climate Change? Investigating the Moderating Role of Technological Progress and Financial Development," MPRA Paper 117567, University Library of Munich, Germany.
    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. Kiryl Rudy, 2022. "Military Economy and Economic Growth: Bidirectional Effects in Transition Economies of Eurasia," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 14(3), pages 285-300, September.
    6. Serap BARIŞ, 2018. "Are defence expenditures the reasons of foreign debts in Turkey?," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(2(615), S), pages 205-220, Summer.

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