Military Spending Research Articles

Does corruption boost economic growth in developing countries?

Many countries with emerging economies suffer from a high level of corruption that hampers their overall development. Despite the abundance of literature scrutinizing the intricate relationship between corruption and economic growth, the precise nature of this connection remains elusive. To address this, this study rigorously examines the link between corruption and economic growth across 129 developing countries, spanning the years 2003 to 2021. The methodology relies on Transparency International's Corruption Perceptions Index (CPI) to gauge the extent of corruption within these nations. Employing the Plate-Corrected Standard Error (PCSE) estimator, we seek to derive a more robust and reliable measure of the correlation between corruption and growth. The noteworthy revelation of this investigation is that higher levels of corruption surprisingly correlate with increased economic growth in developing countries, thereby supporting the intriguing "grease the wheels" hypothesis. These findings challenge conventional assumptions and prompt a re-evaluation of the perceived negative impact of corruption on economic development. Furthermore, our analysis uncovers additional factors influencing economic growth in developing nations. Notably, Foreign Direct Investment (FDI) and revenues from oil contribute positively to economic growth, while augmented military expenditures emerge as a suppressant. These nuanced insights shed light on the multifaceted dynamics shaping economic trajectories in developing countries and underscore the complexity of the interplay between corruption and key economic indicators.

Gunboats and butter: The two percent guideline and NATO burden shifting in the maritime domain

ABSTRACT This study integrates two strands of the alliance burden-sharing literature: the research exploring the impact of the patron’s ability to credibly threaten abandonment and allies’ incentives to burden shift, and the call to disaggregate defense spending when evaluating burden sharing. We contend that allies burden shift by reallocating funds away from capabilities designed to counter threats the patron is unlikely to abandon. Using a novel dataset on naval power, we examine the impact of the North Atlantic Treaty Organization’s (NATO) 2014 Wales Pledge and find a notable reduction in non-US NATO naval capabilities post-pledge. We argue that this trend reflects members’ confidence that the US is unlikely to renege on its commitment to protect vital Sea Lines of Communications (SLOCs). Since the US cannot credibly threaten to abandon its commitment to protect the alliance’s SLOCs, NATO members’ increase in overall defense spending was shifted away from investments in naval capabilities.

The effects of military expenditure and inflation on the unemployment in Pakistan

This study examines the effect of inflation and military expenditure on unemployment in the case of Pakistan. This study used the data set from 1972-2021 and, based on the behaviour of the data, employed the ARDL procedure for assessment. This study found that FDI, GDP, inflation, military expenditure, gross capital formation, and human capital have adverse and noteworthy effects on unemployment over a long period. However, the FDI, GDP, military expenditure, gross capital formation, and human capital have an inconsequential impact on the unemployment rate. However, inflation has an adverse and noteworthy effect on unemployment in a short period. Furthermore, there exists a bi-directional causality between military expenditure and unemployment, while there exists no causality between inflation and unemployment, and military expenditure and inflation. This study concluded that the rise in military expenditure and inflation inversely influence unemployment in Pakistan. This study supported the Philips theory in Pakistan that inflation and unemployment have an adverse link. Based on these findings, this study recommended that the government increase military expenditure to maintain peace in Pakistan and minimise inflation and unemployment.

The Military Rise of China: The Real Defence Budget Over Two Decades

ABSTRACT Despite growing tensions over China’s military build-up and modernization, there is little understanding of China’s defense budget. Published estimates vary implausibly from one quarter of the USA’s defense budget to near parity, and there are very few attempts to understand how its size or composition has changed over time. This paper uses index number techniques to quantify China’s real defense spending over time and relative to the USA. I construct price deflators and show that overall growth has been slower than thought, but also that there has been extremely rapid growth in real military equipment spending that has transformed China’s defense forces. China’s real defense purchasing power is also found to be 60% larger than commonly used market exchange rate estimates and equal to 59% of the USA’s defense budget in 2021. Notwithstanding the rapid growth in equipment, the high relative purchasing power mostly reflects China’s far larger number of active personnel.

Are high-income and innovative nations resilient to the Russia-Ukraine war?

Using an event study analysis on daily closing prices of 83 stock market indices from February 10, 2021 to March 14, 2022, we find that the Russia-Ukraine war negatively impacts stock returns, affecting the high-income nations the most. However, the impact varies from country to country, with some experiencing significant positive or negative abnormal returns during different event windows. Cross-sectional results indicate that the income group of nations, innovation index, net-oil exports, trade-to-GDP ratio, military expenditure, inflation, past returns, and volatility significantly impact the cumulative abnormal returns during different event windows. While countries with a higher innovation index, higher net oil exports, higher military expenditure and lower trade-to-GDP ratios experience positive returns, high-income countries experience significant negative returns. Concomitantly, higher past returns and volatility predict abnormal returns during the war.

Institutions and economic growth: the role of financial inclusion, public spending on education and the military

PurposeThe paper aims to investigate the relationship between institutions and economic growth in developing countries, considering the role of financial inclusion, education spending and military spending.Design/methodology/approachThe study employs dynamic panel analysis, specifically two-step system generalized method of moments (GMM), on a sample of 61 developing countries over the period 2009–2020.FindingsThe results confirm that weak institutional quality, weak financial inclusion and increased military spending are barriers to economic growth, conversely, increased spending on education and gross capital formation contribute to economic growth in developing countries. Regarding the specific institutional factor, we find that corruption, ineffective government, voice and accountability and weak rule of law contribute negatively to growth.Practical implicationsThe study calls for strengthening institutions so that the financial system supports economic growth and suggests increasing spending on education to improve access to and the quality of human capital, which is an important determinant of economic growth.Originality/valueThe study contributes to scarce literature by empirically analyzing the relationship between institutions and economic growth by considering the role of financial inclusion, public spending on education and military spending, factors that have been ignored in previous studies. In addition, the study identifies the institutional dimension that contributes to reduced economic growth in developing countries.

REINVESTIGATING THE IMPACT OF GROSS DOMESTIC SAVINGS, EXCHANGE RATES, AND NATIONAL DEBT ON MILITARY EXPENDITURE IN MALAYSIA

This study uses the ARDL method to explore how national debt relates to military expenditure, considering both short and long timeframes. In the short term, the research finds that changes in national debt don't strongly impact military expenditure right away. Interestingly, a stronger national currency is associated with lower short-term military expenditure. Additionally, higher domestic savings positively affect military expenditure in the short term, highlighting the role of local resources. In the long term, the study shows that all considered factors such as national debt, exchange rates, and domestic savings are positively contributed to military expenditure. This suggests that over time, increases in these factors are linked to higher military expenditure. Overall, the study highlights the complex connections between national debt, economic factors, and military expenditure, offering insights into both immediate and long-term influences on defense budget choices.

Modeling of Economic And Military Expenditure of South Pacific Countries to Increase the Role of Indonesian Diplomacy through the South Pacific Defense Ministers Meeting (SPDMM) Forum

The South Pacific is a western lake for the West, Asia and China. This is because of its strategic location, abundant natural resources but minimal human resources in managing it, so that this region becomes a contest for superpower state hegemony. The purpose of this study is to analyze the relationship of causality, response in case of shock from a variable through impulse response, long-term and short-term effects of economic growth variables, investment, foreign debt, exports, imports and military expenditure, and forecasting based on actual data up to 2045. The method used in this study is VECM / VAR. Data collection was obtained from reports from the Ministry of Defense, Ministry of Economic Affairs, literature studies and previous research.

Japan in 2023

This year saw efforts by Japan’s government, led by prime minister Fumio Kishida, to tackle problems such as the need to arrest the declining birthrate, increase defense spending, deepen security ties with the US and other nations, and safeguard the rights of sexual minorities. Yet despite being in an enviable position domestically, with no national election looming, a decimated opposition, and a coalition partner with the votes to underwrite his administration, Kishida was unable to rally the public behind a tax hike to fund defense spending. Japan’s prime ministers remain sensitive to public opinion, likely due to the precariousness of their position as leader of the Liberal Democratic Party rather than electoral considerations.

Does Military Expenditure Affect Economic Growth in the Developing Countries?

خلال الخمسين عامًا الماضية ، كان هناك كم هائل من الدراسات التجريبية حول تأثير الإنفاق العسكري على النمو الاقتصادي في البلدان النامية ، باستخدام منهجيات وتقنيات ونماذج اقتصادية مختلفة. وعلى الرغم من ان العديد من هذه الدراسات التجريبية تستخدم منهجيات متنوعة خلال العقود الأربعة الماضية ، إلا أنها لا تقدم إجماعًا حاسمًا . لسد الفجوة في الأدبيات ولفحص الآثار الاقتصادية للإنفاق العسكري في 64 بلدًا ناميًا في الفترة من 2017 إلى 2022 ، تستخدم هذەالورقە نموذجًا محددًا وتقدم أدلة تجريبية تستند إليه. وذلك باستخدام تقنيات بيانات اللوحة ، تظهر النتائج بشكل متسق أن هناك علاقة إيجابية بين النمو الاقتصادي والإنفاق العسكري في البلدان النامیە في العينة. پوختە لە ماوەی چوار دەیەی ڕابردوودا لێکۆڵینەوەی ئەزموونی زۆر لەسەر کاریگەریی خەرجییە سەربازییەکان لەسەر گەشەی ئابووری لە وڵاتانی تازەپێگەیشتودا ئەنجامدراوە. میتۆدۆلۆژیا و تەکنیک و مۆدێلی ئابووری پێوانی جۆراوجۆر بەکارهێنراون، کە لە ڕێگەی توێژینەوە و پانێڵ داتاکانی نێوان وڵاتانەوە گرنگی بە ٦٤ وڵاتی تازە پێشکەوتوو دراوە. سەرەڕای زۆری و فرەچەشنی ئەم توێژینەوەیە، بەڵگەکان لە سەر بوونی پەیوەندی نێوان (خەرجی سەربازی - گەشەی ئابووری) هێشتا بێ ئەنجامن. ئەوەی جێگەی تێڕامانە، تەنیا ژمارەیەکی سنووردار لە لێکۆڵینەوەکان ئەم پەیوەندییەیان لەناو بواری فراوانی وڵاتانی تازەپێگەیشتودا لێکۆڵیەوە. بۆ چارەسەرکردنی ئەم بۆشاییە، ئەم توێژینەوەیە مۆدێلێکی داتاکانی پانێڵ بەکاردەهێنێت بۆ پێشکەشکردنی تێڕوانینێکی ئەزموونی سەبارەت بە کاریگەرییە ئابوورییەکانی خەرجییە سەربازییەکان لە سەرانسەری 64 تازە پێشکەوتو لە ماوەی 2017-2022. بەگشتی ئەو ئەنجامانەی کە بە بەکارهێنانی شێوازەکانی توێژینەوەی داتاکانی پانێڵ بەدەست هاتوون ئاماژە بەوە دەکەن کە خەرجییە سەربازییەکان بەشدارن لە پێشخستنی گەشەی ئابووری لەو وڵاتانەی کە لە نمونەکەدا هاتووە

ECONOMIC SECURITY OF UKRAINE DURING MILITARY OPERATIONS: CHALLENGES AND WAYS OF COUNTERACTION

The article focuses on analyzing the state of economic security of Ukraine during the military operations. It identifies key challenges directly impacting the country's economic security and explores potential ways to overcome them. 
 The analysis established that the current state of the economic system of Ukraine was formed under the influence of destructive external and internal challenges that pose threats to economic security. The challenges associated with the protracted war remain crucial for Ukraine.
 The article highlights the challenges that threaten the economic security of Ukraine's external security environment such as high dependence of the domestic economy on foreign borrowings, deteriorating financial conditions of the export-oriented production sector, and inadequate government responses to conflicts in political, economic and social realms. There are still threats to the amount and timing of external financing for the state budget, and logistical difficulties are a significant risk, which negatively affects export earnings and the economic security of the state.
 Internal threats include high level of corruption in public authorities; ineffective control over compliance with the law; inefficient use of state and local budgets; relatively high level of shadow economy.
 The author substantiates the priority directions and ways of counteracting the challenges and threats to Ukraine's economic security during military operations. Ensuring the economic security of the state in a military conflict requires flexibility, predictability, and an integrated approach that includes social, economic, and defense aspects of national security. Key priorities include ensuring food security, supporting crucial economic sectors, especially those important for defense and essential goods production, implementing policies for financial aid from international partners, transparent and effective use funds received from international partners, implementing a policy to increase defense spending

What is the long-run relationship between military expenditures, foreign trade and ecological footprint? Evidence from method of Maki cointegration test

AbstractThe US leads the global economy regarding foreign trade volume and military expenditures. Increases in military expenditures and foreign trade can substantially affect environmental issues. This study's preliminary research objective is to explore the interaction of foreign trade and military expenditures with ecological concerns in the long-term of the US economy using current time series techniques. Ecological footprint, military expenditures, exports, imports, urbanization, and agricultural area variables are used in the analysis with annual data for the US economy for the period 1970-2018. A relationship in long-term between the variables is revealed by the Maki (2012) cointegration test results, considering structural break. As indicated by the findings obtained from the coefficient estimation, an increase in military expenditures, exports, and agricultural area decreases the ecological footprint, while an increase in imports increases it. In addition, the results of the time-varying causality test show that there are periodic causality relationships between the variables. To sum up, there is a negative relationship between military expenditures, exports, and agricultural area, and ecological footprint, and a positive relationship between imports and ecological footprint.

Defence spending and real growth in an asymmetric environment: Accessing evidence from a developing economy

AbstractThe connection between the defence spending and real growth remains a forefront subject of theoretical and empirical research. Nigeria, like many other developing nations, continues to devote numerous fiscal resources to military spending in ensuring peaceful coexistence and to attain sustainable economic growth after her independence in 1960. Because the interdependence between them has policy implications, this paper studies whether there exists asymmetric causality between them. The dataset, from World Bank database, includes long‐range historical series for military expenditure/GDP ratio and growth rate of GDP, covering 1960–2021. In exploring the empirical relations, the paper shows evidence for the symmetric Granger causality, from Toda–Yamamoto (1995) and asymmetric causality, from Hatemi‐J (2012). The standard (symmetric) identifies unidirectional causality evidence, from defence spending to the GDP per capital growth, with no retained potential feedback from real growth to defence spending. The Hatemi‐J (asymmetric) causality maintains evidence that positive shocks in the defence spending may cause a positive shock in the GDP per capital, supposing that increase perturbations to defence spending would be productive and growth‐enhancing. This causal impact is not evident for positive growth shocks. The findings support the need for policymakers to consider sustained growth targets when redesigning the military budget.

Indo-Pacific Geopolitical Dynamics: The Role of Australia, AUKUS, and Increasing the Defense Budget

The development of the defense and security situation in the Indo-Pacific region due to the situation in the South China Sea made the US alert and established an AUKUS defense pact. AUKUS has members from the US, UK and Australia. Australia, as a country located closer to the South China Sea, is the focus of the other two AUKUS members in countering Chinese hegemony. The purpose of this article is to find out how Australia is trying to build its defense industry by increasing the defense budget when joining AUKUS. This research was conducted using qualitative descriptive methods. The data used is secondary data originating from published journals and reports. This research concludes that Australia's joining AUKUS made Australia try to equalize its military capabilities with the US and UK by increasing its defense budget.

THE FUTURE OF INTERNATIONAL COOPERATION IN THE ARCTIC

The Arctic is a strategically important region for our country, with enormous opportunities, but also with serious global challenges and threats. One such challenge is the erosion of international cooperation. Today, international cooperation in the Arctic is facing the most serious challenge in its history. We argue that today there is a steady trend toward a return to realism in Arctic cooperation, with non-hierarchical goal-setting giving way to the proclamation of national security as the primary goal by most Arctic states. This entails an increase in military budgets, and nation-states are becoming the main actors in Arctic governance. Finally, military power, hitherto largely seen as an "act of desperation", will be increasingly used by the Arctic states in their public rhetoric.

Does The Military Expenditure Hurt The Economic Growth? Evidence Derive From South Asian Countries

Research Aims: This study examines the impact of military spending onthe economic growth in South Asian countries.Design/methodology/approach: It uses the 134 unbalanced data points ofsix South Asian countries collected from the various reports of the WorldBank. Descriptive and exploratory research designs are used. It is basedon the positivist research philosophy. Some statistical and econometrictools like descriptive statistics, panel unit root test, Johnsen and Kaoresidual cointegration test, and panel ARDL model are used to explorethe impact of military expenditure, inflation rate, unemployment rate,and gross capital formation on the economic growth of South Asiancountries.Research Findings: Inflation has a positive effect on economic growth inthe long run but a negative impact in the short run. Military expenditurehas a positive effect in the long run but a negative impact on economicgrowth; the unemployment rate is negative, and gross capital formationpositively impacts economic growth in the long and short run in SouthAsian Countries. Military spending does not significantly affect economicprogress in the long run, but military expenditure hurts economic growthin the short run. One unit increase in military spending results from a0.633 percent decrease in the GDP growth of South Asian countries. Theyouth unemployment rate negatively impacts economic growth in theshort and long run. One unit increase in the unemployment rate resultsfrom 0.093 and 0.319 unit decrease in economic growth in the long andshort run, respectively. Likewise, one unit increase in capital formationand inflation rate results from 0.203 and 0.116 unit increase in GDPgrowth in the long run, respectively. The inflation rate negatively impactseconomic growth in the short run. One unit increase in inflation rateresults from 0.191 unit decrease in GDP growth in short-run. Prioritizestrategies that mitigate short-term negative impacts of inflation andmilitary expenditure while fostering long-term economic growth throughinvestment in capital formation and addressing youth unemployment inSouth Asian countries.Keywords: Inflation, unemployment, panel data, Keynesian stimulushypothesis, stagnation

Are the Defense Policy and Military Expenditure in China Economically or Politically Driven?

Are the Defense Policy and Military Expenditure in China Economically or Politically Driven?

The Economic Benefits of North Warning System Modernization

ABSTRACT This study examines the economic impacts of the North Warning System (NWS) modernization. It begins by first providing a summary of the creation and evolution of the North American Aerospace and Defense Command (NORAD) and the NWS with a specific intention of setting the stage for the discussion on subsequent areas. Understanding how NORAD and the NWS developed to where it is today is important to understand the choices available to the Canadian government moving forward. Next, the current security environment in Canada’s North will be reviewed. The impact of climate change and global warming, new technology, and new threats changes the strategic environment in the North and Canada needs to revisit how it approaches these challenges. Based on this review of the security environment, the literature on socioeconomic studies, electoral districts and defence spending in the North can be presented along with the empirical data that exists from past studies. The study looks at five scenarios taking a rough order of magnitude look at possible economic benefits to Canada’s three northern territories and Labrador based on the requirement for modernizing the NWS, a critical issue for the future defence of Canada and North America.

Does corruption moderate the military spending – Informal economy nexus? The empirical evidence from Asian countries

PurposeIn pursuit of good governance and better allocation of resources, corruption and informal economy are of interest to policymakers and citizens alike. The impacts of military spending on the informal economy are scant. Moreover, the effects of an external factor, such as corruption that moderates this relationship, have largely been neglected in previous studies. Hence, this paper investigates how corruption moderates the effects of military spending on the informal economy in 30 Asian countries from 1995 to 2017.Design/methodology/approachThis paper utilizes the GMM estimation technique, which allows cross-sectional dependence and slope homogeneity in panel data analysis, to examine the moderating role of corruption on the relationship between military spending and the informal economy.FindingsEmpirical findings from this paper indicate that an increase in military spending declines the informal economy while corruption increases it. Interestingly, the negative effects of military spending on the informal economy will mitigate with a greater degree of corruption in the Asian region. We also find that enhancing economic growth and attracting more FDI has reduced the informal economy in Asian countries.Originality/valueTo the best of the authors' knowledge, this is the first empirical study conducted to examine the moderating role of corruption on the military spending – informal economy nexus. Thus far, this approach has not been investigated in the existing literature, particularly for Asian countries.

Do Threats or Shaming Increase Public Support for Policy Concessions? Alliance Coercion and Burden-Sharing in NATO

Abstract Existing literature suggests that alliance members can use their partners’ abandonment fears to obtain favorable concessions for themselves. However, evidence on the effectiveness of threats of abandonment as motivation for defense burden-sharing remains limited. This article uses a survey experiment conducted in Poland and Germany to assess how American signals of support and threats of abandonment shape public support for increasing their countries’ military spending. The findings suggest that threats of abandonment increase public support for higher defense spending, whereas approaches like “naming and shaming” under-contributing partners do not. However, assurances of protection did not decrease support for defense spending, and combining threats with assurances if anything increased those threats’ effects. Threats are thus most effective when they do not fundamentally undermine targets’ confidence in US protection. The findings have implications for understanding alliance politics and the utility of public pressure, and for policy debates about encouraging defense burden-sharing.