Modelling Greek-Turkish Rivalry: An Empirical Investigation of Defence Spending Dynamics

Abstract

Three models are used to test the widely held view that there is military rivalry between Greece and Turkey. The modelling is based on the work of McGuire (1977), Desai & Blake (1981) and a vector autoregression specification. Particular attention is paid to appropriate diagnostic tests, the long-run values and Granger causality. Empirical findings provide little corroboration of the view that there is an arms race between Greece and Turkey. Such results should not be entirely surprising. Rivalry can take many other forms, such as periodic exchanges of bellicose rhetoric; economic, political and diplomatic manoeuvering; lobbying within existing alliances; political, historical and cultural propaganda. Given that the statistical evidence provides little support for the view that there is an arms race between Greece and Turkey, there are possibly other explanations for their military expenditures. Therefore, on the empirical side, the most important issue for future research of the determinants of military expenditures in both countries would be the consideration of models that incorporate the impact of various strategic, political and economic factors which may be important determinants of defence spending.