Military Expenditure and Economic Growth: Evidence from India and Pakistan

Abstract

This study explores the relationship between military spending, education expenditure and health expenditure in India and Pakistan over the time period of 2000-2018. The data has been collected from SIPRI and World Bank data base. Augmented Dickey Fuller Test has been used for unit root. VAR leg length criteria have been used to identify the ideal lag for the model. As all the variables are either I(0) or I(1), Auto Regressive Distributed Lag model (ARDL) has been used to analyze the relationship between the variables. Bounds test is used to analyze the cointegration among the variables. The result shows that there exists long run relationship between the variables in both countries. But, in India the causality runs from military spending to GDP where as in Pakistan the causality runs from GDP to military spending in the long run. Further, in India there is no evidence of short run relationship between the variables where as in Pakistan there exist positive relationship between the GDP and military expenditure in the short run.