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The Defense-growth nexus: An application for the Israeli-Arab conflict

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  • Abu-Qarn, Aamer

Abstract

This paper revisits the defence-growth nexus for the rivals of the Israeli-Arab conflict over the last four decades. To this end, we utilize the Toda and Yamamoto (1995) causality test and the generalized variance decomposition. Contrary to the conventional wisdom and many earlier studies, we fail to detect any persistent adverse impact of military expenditures on economic growth. Our conclusions are kept intact even when we account for the possibility of endogenous structural breaks and during the post-1979 peace treaty period. Our findings imply insignificant peace dividends once the conflict is resolved and the military spending is cut to internationally acceptable standards.

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  • Abu-Qarn, Aamer, 2010. "The Defense-growth nexus: An application for the Israeli-Arab conflict," MPRA Paper 22275, University Library of Munich, Germany, revised 2010.
    • Handle: RePEc:pra:mprapa:22275
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    More about this item

    Keywords

    Growth; Middle East; Israeli-Arab conflict; Causality; Generalized Forecast Error Variance Decomposition;
    All these keywords.

    JEL classification:

    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War

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