Military Expenditures and Economic Growth in Less Developed Countries: An Augmented Model and Further Evidence

The paper revisits the causality relationship between defence spending and economic growth for South Africa during the period 1960–2018. The results of our estimation show that defence spending and economic growth are cointegrated and that there is bidirectional Granger causality running between defence spending and economic growth in the long run. We then applied a Hodrick-Prescott filter to decompose the trend and the fluctuation components of the defence spending and economic growth series. The findings from the autoregressive distributed lag bounds test estimations show that in the long- and short-run, the trends and cyclicality of defence spending retard economic growth. The estimation results show that there is cointegration between the trends and the cyclical components of the two series, which suggests that the Granger causality possibly relates to the business cycle. This study suggests that investing more and reducing inefficiency spending in the defence sector during fluctuations can further stimulate economic growth in South Africa.

India is one of the largest producer and consumer of electricity in the world owing to being one of the most populous country in the world signifying the demand for electricity is only set to grow further. World has witnessed an era of economic growth aided pertinently by electricity consumption and growing demand. With FDI indorsed downright to this vital utilities sector, it becomes imperative to cognize the relationship of Electricity Consumption, Economic Growth and FDI in India. In this study we investigate the causal direction of relationship among Foreign Direct Investment, Electricity Consumption and Economic Growth in India by using time-series data for the period 1986–2021 and employing econometric models. We find two uni-directional causalities running from Electricity Consumption to Economic Growth and Economic Growth to FDI and a bi-directional causality between Electricity Consumption and FDI. The results of the study provide a novel perspective for policy makers while formulating policies related to the power sector and foreign direct investments in India. The focus of Policy makers should be on enabling electricity service providers to offer best services to commercial and non-commercial participants as it aids in Economic growth of the country. For enhanced economic growth a country like India must have good and world-class infrastructure, efficient and effective regulatory mechanism equitable for all stakeholders, an improved living standard for people of all economic strata and a stable, healthy business friendly environment coupled with policy stability through stable government.

This paper provides a contribution to the growing corpus of knowledge and understanding of the interaction between economic growth and defence spending in South Africa by specifying a Keynesian simultaneous equation model and estimating the system for the period 1961 to 1997. The model contains a growth equation, a savings equation, a trade balance equation and a military burden equation and when estimated by single equation and systems estimation methods is relatively well specified. There is evidence of an overall negative effect of military spending on the economy over this period, though the significance of individual coefficients is low. There is certainly no evidence of any positive impact, suggesting that cuts in military spending do present an opportunity for improved macroeconomic performance.

Publisher Summary This chapter discusses the financial development and economic growth in underdeveloped countries. An observed characteristic of the process of economic development over time, in a market-oriented economy using the price mechanism to allocate resources, is an increase in the number and variety of financial institutions and a substantial rise in the proportion not only of money but also of the total of all financial assets relative to GNP and to tangible wealth. Typical statements indicate that the financial system somehow accommodates—or, to the extent that it malfunctions, it restricts—growth of real per capita output. Such an approach places emphasis on the demand side for financial services; as the economy grows it generates additional and new demands for these services, which bring about a supply response in the growth of the financial system. In this view, the lack of financial institutions in underdeveloped countries is simply an indication of the lack of demand for their services.

In this article we examine the dynamic causal relationship between economic growth, employment, and poverty reduction in South Africa -- using the Auto-Regressive Distributed Lag (ARDL) bounds testing procedure. The study attempts to answer one critical question: does economic growth in South Africa trickle down to the poor through job creation? The study uses two proxies to measure the incidence of poverty in South Africa, namely household consumption per capita and infant mortality. The empirical results of the study fail to support the trickle-down effect between economic growth and poverty reduction in South Africa. Moreover, the results show that there is no causal relationship between economic growth and poverty reduction in either direction. The results apply irrespective of whether the poverty level is measured by the real per-capita consumption or by the infant mortality rate.

This research paper investigates the relationship between defence expenditure and economic growth in South Africa. It is understood that South African Defence Force plays a vital role in peace keeping security in African and SADC as a region. This makes it a particularly interesting case study on nexus between defence expenditure and economic growth. This investigation presents such a study, by estimating an econometric model of the South African military expenditure in considering pure economic factors. The period of the study covers from 1988 to 2012. On the basis of determining the long term equilibrium the application of Johansen cointegration and Engel-Granger were applied. At the later stage the technique of Granger causality was performed on variables of interest in the study. The study concludes that there is long run relationship between defence expenditure and economic growth. Also for causal analysis military expenditure seem to granger cause gross domestic product per capita at 5 percent significance level. DOI: 10.5901/mjss.2014.v5n20p2769

This study applies a statistical model to examine the overtime relationship between military expenditure and economic growth in South Africa. The model is based on a neoclassical production function, and is developed and estimated for the time period 1950 to 1985. The results indicate that the size effects of military expenditure on economic growth are negative, while the externality effects of military spending are positive. In addition, decreasing foreign investment and increasing domestic unrest are found to have negative impacts on GDP growth. Labor employment is positively related to growth, but non‐white labor is more strongly significant than white labor. These results are consistent with previous cross‐section studies that find some evidence for positive and negative effects of military spending on economic growth.

Development Finance and EconometricsThis paper investigates the causal relationships between trade, capital inflows and economic growth in post-liberalised South Africa over the period from 1995 to 2011. The results show that economic growth in South Africa is driven primarily by trade and fixed investment rather than by capital inflows. However, the relationship between economic growth and imports is bidirectional, and thus economic growth in South Africa is associated to a greater extent with the export-led growth hypothesis than the import-led growth hypothesis. In addition, the results find in favour of growth-led FDI rather than FDI-led growth, and that portfolio inflows rather than FDI are integrated into the country's trade-led growth dynamics.

This research analyzes whether there is a link between economic growth and SMEs success in South Africa. The South African economy can only grow with the contribution of growing sustainably SMEs which will accelerate economic growth. The research concluded that SME success has a positive impact on sustainable economic growth in South Africa and that there is a link between economic growth and SME success. The conducted research recommends that by improving the success rate of SME, the South Africa’s stagnating economy

Researchers concur that energy plays a very significant role in the economic growth and development of any country and that increasing access to modernized systems of energy is critical to unlocking enhanced economic and social development in any country. In the light of this, the current article has empirically examined the causal interactions between energy consumption and economic growth in South Africa for the period 1970 to 2015 using the ARDL-bounds testing method. The results show that all the variables were found to be integrated of order one. The empirical results obtained fully support a positive long-run cointegrating relationship between real economic growth and energy consumption in South Africa. The article used trade openness and financial development as control variables in the model. The research found that although there is unidirectional causality running from energy consumption to economic growth in the short-run, there is long-run bidirectional causality between the two variables as indicated by the coefficients of the error correction terms which were found to be negative and significant as predicted by theory. This means that reducing energy consumption adversely affect real economic growth in both the short- and the long-run; thus, South Africa should adopt a more vigorous energy policy.

The article empirically examined the causal interactions between energy consumption and economic growth in South Africa for the period 1970 to 2015 using the ARDL-bounds testing method. The article found a positive long-run cointegrating relationship between real economic growth and energy consumption in South Africa. In addition, the research found that although there is unidirectional causality running from energy consumption to economic growth in the short-run, there is long-run bidirectional causality between the two variables as indicated by the coefficients of the error correction terms which were negative and significant as predicted by theory. This means that reducing energy consumption adversely affect real economic growth in both the short- and the long-run; thus, South Africa should adopt a more vigorous energy policy.

Purpose – The purpose of this paper is to examine the causal relationship between research publications and economic growth – using time-series data from South Africa. The paper attempts to answer two critical questions: is there a long-run relationship between research publications and economic growth in South Africa? Do research publications from South African researchers Granger-cause economic growth? Design/methodology/approach – Unlike some of the previous studies, the current paper uses a trivariate ECM-based Granger-causality model to examine this linkage. Specifically, the study incorporates education as an intermittent variable between research and economic growth. In addition, the paper uses the recently developed autoregressive distributed lag (ARDL)-bounds testing procedure, which has numerous advantages, especially when the sample size is small. Findings – The results of this study show that there is a long-run relationship between research publications and economic growth in South Africa. The results also show that there is a distinct causal flow from research publications to economic growth in South Africa. This applies both in the short-run and in the long-run. Other results also show that: there is a short-run bidirectional causality between research publications and education; and there is a short-run bi-directional causality between education and economic growth, but a long-run unidirectional causal flow from education to economic growth. Practical implications – The findings of this paper underscore the crucial role that research plays in economic growth and development. Overall, the findings of this study show that research in South Africa is pro-growth. This implies that the recent significant increase in government expenditure on research and innovation, which is aimed at increasing the country’s scientific research outputs, is likely to pay off. Originality/value – To the best of the authors’ knowledge, this paper is the first of its kind to examine in detail the dynamic causal relationship between research outputs and economic growth in South Africa – using the recently developed ARDL-bounds testing approach within a trivariate setting.

The foundation of this paper is built on the premise that foreign direct investment (FDI) follows economic growth and development as opposed to the narrative that argues otherwise. Considering that background, this paper pursued finding the direction of causality and the kind of relationship that exists between the two main variables of interest (FDI and Economic growth) using time series data spanning 1980–2018. Using the vector-autoregressive error correction mechanism and the autoregressive distributive lag, our paper found neither uni nor bidirectional causality between economic growth and FDI in South Africa. The findings support the notion that FDI follows growth and development as opposed to the current policy stance that seeks to attract more FDI without exhausting the potential carried by domestic firms in stimulating economic growth. The results from Granger causality tests, however, could not reject the null hypothesis of the causality that runs from unemployment to economic growth. The study found that unemployment in South Africa Granger causes economic growth significantly. Recommendations arising from our findings are that South African policymakers may need to consider paying more attention to inward-looking policies. More efforts if possible should be put toward making sure that domestic investment is stimulated through making it cheaper especially for small businesses to secure funding as well as making the investment environment small business-friendly to improve their success and contribution toward sustainable economic growth.

Nigeria and South Africa are two dominating economies in Africa but defer in terms of infrastructural development. The question of whether this infrastructural difference culminate to the difference in economic growth in the two economies is central to this study. This paper therefore, examined the impact of capital expenditure on infrastructure and economic growth both in Nigeria and South Africa using time series data from 1980 to 2016.
 Autoregressive Distributed Lag (ARDL) Bound tests technique of cointegration was used to on country-specific model of aggregate expenditure, following the Keynesian theory.
 The result showed that there is a the long-run relationship among the variables used in Nigeria and South Africa. Capital expenditure on infrastructure has positive but insignificant impact on economic growth in Nigeria while it was positive and significant on the economic growth in South Africa. The insignificant impact of capital expenditure on infrastructure on economic growth compare with South Africa may be the major difference in the two economies. This is traceable to lack of accountability and corruption in Nigeria compared to the good governance that truncated corruption and mismanagement in the government circle in South Africa. Tax base has positive and significant impacts on the economic growth in these two countries, this was supported by the Pairwise Granger Causality in which TAX granger caused economic growth in both countries.
 The study recommends injection of sufficient fund into infrastructural development in Nigeria. AS tax contributed positively to economic growth in both economies, it is recommended that tax revenue realized should be judiciously spent by providing the necessary amenities to discourage evasion of tax.

The paper empirically examines the relationship between government expenditure and economic growth in South Africa, for the period 1980 to 2011. Econometric techniques are applied to test the hypothesis that an increase in government expenditure has increased economic growth. The study examines the causal relationship that exists between government spending and economic growth in South Africa using OLS regression techniques. Secondary data obtained from the SARB is used for data analysis. The results confirm a long-run positive relationship which exists between the two variables under study, and further shows that gross capital formation granger causes economic growth. DOI: 10.5901/mjss.2013.v4n3p235