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Interdependence between US and European Military Spending: A Panel Cointegration Analysis (1988-2013)

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  • Caruso, Raul
  • Di Domizio, Marco

Abstract

The aim of this paper is to study the interdependence of military spending between US and a panel of European countries in the period 1988-2013. The empirical estimation is based on a: (i) a unit root tests and a cointegration analysis; (ii) FMOLS and DOLS estimations. General results highlight that military spending of European countries is: (1) positively associated with US military spending and (2) negatively associated with average military spending of other European countries.

Suggested Citation

  • Caruso, Raul & Di Domizio, Marco, 2015. "Interdependence between US and European Military Spending: A Panel Cointegration Analysis (1988-2013)," MPRA Paper 64550, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:64550
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    References listed on IDEAS

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    1. Kao, Chihwa, 1999. "Spurious regression and residual-based tests for cointegration in panel data," Journal of Econometrics, Elsevier, vol. 90(1), pages 1-44, May.
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    3. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    4. Peter Pedroni, 1999. "Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(S1), pages 653-670, November.
    5. Todd Sandler & James C. Murdoch, 1990. "Nash-Cournot or Lindahl Behavior?: An Empirical Test for the NATO Allies," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(4), pages 875-894.
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    7. Murdoch, James C. & Sandler, Todd, 1984. "Complementarity, free riding, and the military expenditures of NATO allies," Journal of Public Economics, Elsevier, vol. 25(1-2), pages 83-101, November.
    8. Peter Pedroni, 2001. "Purchasing Power Parity Tests In Cointegrated Panels," The Review of Economics and Statistics, MIT Press, vol. 83(4), pages 727-731, November.
    9. Smith, R P, 1989. "Models of Military Expenditure," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 4(4), pages 345-359, Oct.-Dec..
    10. Smith, R P, 1980. "The Demand for Military Expenditure," Economic Journal, Royal Economic Society, vol. 90(363), pages 811-820, December.
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    Cited by:

    1. Ortiz, Cristian & Alvarado, Rafael & Salinas, Aldo, 2019. "The effect of military spending on output: New evidence at the global and country group levels using panel data cointegration techniques," Economic Analysis and Policy, Elsevier, vol. 62(C), pages 402-414.
    2. Bove Vincenzo & Elia Leandro & Pelliccia Marco, 2016. "Centrality in Trade Networks and Investment in Security," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 22(1), pages 27-39, January.
    3. 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.
    4. 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.
    5. Douch Mohamed & Solomon Binyam, 2018. "Status or Security: The Case of the Middle East and North Africa Region," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 24(3), pages 1-12, September.
    6. Saba Charles Shaaba, 2021. "Convergence or Divergence Patterns in Global Defence Spending: Further Evidence from a Nonlinear Single Factor Model," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 27(1), pages 51-90, February.
    7. Caruso Raul & Di Domizio Marco, 2015. "The Impact of US Military Spending on Public Debt in Europe (1992–2013): A Note," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 21(4), pages 459-466, December.
    8. Osabuohien-Irabor Osarumwense & Julian I. Mbegbu, 2017. "Power and Size analysis of Co-integration tests in Conditional Heteroskedascity: A Monte Carlo Simulation," Romanian Statistical Review, Romanian Statistical Review, vol. 65(3), pages 17-34, September.
    9. 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.
    10. Jacques Fontanel, 2019. "The military budget, a less and less significant indicator of the useful national defense effort," Working Papers hal-02422300, HAL.
    11. Anna Balestra & Raul Caruso, 2024. "Education and Military Expenditures: Countervailing Forces in Designing Economic Policy. A Contribution to the Empirics of Peace," DISCE - Quaderni del Dipartimento di Politica Economica dipe0035, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    12. Stamegna, Marco & Bonaiuti, Chiara & Maranzano, Paolo & Pianta, Mario, 2024. "The economic impact of arms spending in Germany, Italy, and Spain," MPRA Paper 120608, University Library of Munich, Germany.
    13. 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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    More about this item

    Keywords

    Military Spending; interdependence; Panel Cointegration; Fully Modified OLS; Dynamic OLS.;
    All these keywords.

    JEL classification:

    • F52 - International Economics - - International Relations, National Security, and International Political Economy - - - National Security; Economic Nationalism
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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