FDI Inflows and Military Expenditure

Abstract

This chapter attempts to investigate the effect of military expenditure on FDI inflows in the 15 emerging market economies over the year 2002 to 2015. Military expenditure takes away scarce public resources, which could have been used for the development of crucial physical and social infrastructure leads to have a negative impact on FDI inflows. The authors have followed both the static and dynamic panel data methodology along with other relevant macroeconomic variables for this exercise. They have found from their analysis that military expenditure is statistically significant on FDI inflows in emerging economies over the year 2002 to 2015. The authors have also examined the relationship between military spending and FDI inflows in the context of economic growth across the emerging economies during the period 2002 to 2014. It has also been found that the military expenditure has a significant impact on FDI inflows in special reference to BRICS countries.