Abu-Qarn, Aamer (2010): The Defense-growth nexus: An application for the Israeli-Arab conflict.
Download (79Kb) | Preview
This paper revisits the defence-growth nexus for the rivals of the Israeli-Arab conflict over the last four decades. To this end, we utilize the Toda and Yamamoto (1995) causality test and the generalized variance decomposition. Contrary to the conventional wisdom and many earlier studies, we fail to detect any persistent adverse impact of military expenditures on economic growth. Our conclusions are kept intact even when we account for the possibility of endogenous structural breaks and during the post-1979 peace treaty period. Our findings imply insignificant peace dividends once the conflict is resolved and the military spending is cut to internationally acceptable standards.
|Item Type:||MPRA Paper|
|Original Title:||The Defense-growth nexus: An application for the Israeli-Arab conflict|
|English Title:||The Defense-growth nexus: An application for the Israeli-Arab conflict|
|Keywords:||Growth, Middle East, Israeli-Arab conflict, Causality, Generalized Forecast Error Variance Decomposition|
|Subjects:||O - Economic Development, Technological Change, and Growth > O5 - Economywide Country Studies > O53 - Asia including Middle East
H - Public Economics > H5 - National Government Expenditures and Related Policies > H56 - National Security and War
|Depositing User:||Aamer Abu-Qarn|
|Date Deposited:||23. Apr 2010 10:51|
|Last Modified:||12. Feb 2013 02:28|
Abu-Bader, S. and Abu-Qarn A. (2003) Government Expenditures, Military Spending and Economic Growth: Causality Evidence from Egypt, Israel, and Syria. Journal of Policy Modeling 25 567-583.
Bai, J. and Perron P. (2003) Computation and Analysis of Multiple Structural Change Models. Journal of Applied Econometrics 18(1) 1-22.
Beenstock, M. (1998) Country Survey XI: Defence and the Israeli Economy. Defence and Peace Economics 9 171-222.
Benoit, E. (1978) Growth and Defence in Developing Countries. Economic Development and Cultural Change 26 271-80.
Bichler, S. and Nitzan J. (1996) Military Spending and Differential Accumulation: A New Approach to the Political Economy of Armament--the Case of Israel. Review of Radical Political Economics 28 51-95.
Cohen, J.S. and Ward M.D. (1996) Towards a Peace Dividend in the Middle East: The New Dynamics of Military Spending," in The Peace Dividend, edited by N.P. Gleditsch et al. Amsterdam, New York and Oxford: Elsevier, North-Holland, 425-37.
Cohen, J.S., Stevenson R.T., Mintz A. and Ward M.D. (1996) Defense Expenditures and Economic Growth in Israel: The Indirect Link. Journal of Peace Research 33 341-352.
DeRouen, K., Jr (1995) Arab-Israeli Defense Spending and Economic Growth. Conflict Management and Peace Science 14 25-47.
DeRouen, K., Jr (2000) The Guns-Growth Relationship in Israel. Journal of Peace Research 37 69-83.
Dunne, J.P., Smith R. and Willenbockel D. (2005) Models of Military Expenditure and Growth: A Critical Review. Defence and Peace Economics 16 449-461.
Joerding, W. (1986) Economic Growth and Defense Spending: Granger Causality. Journal of Development Economics 21 35-40.
Lebovic, J.H. and Ishaq A. (1987) Military Burden, Security Needs, and Economic Growth in the Middle East. Journal of Conflict Resolution 31 106-138.
Linden, M. (1992) Military Expenditures, Government Size and Economic Growth in the Middle East in the Period 1973-85. Journal of Peace Research 29 265-270.
Looney, R. and Winterford D. (1995) Economic Causes and Consequences of Defense Expenditures in the Middle East and South Asia. Boulder, CO: Westview Press.
Pesaran, M.H. and Shin Y. (1998) Generalized Impulse Response Analysis in Linear Multivariate Models. Economics Letters 58 17-29.
Pesaran, M.H., Y. Shin and R.J. Smith (2001) Bounds Testing Approaches to the Analysis of Level Relationships. Journal of Applied Econometrics 16 289-326.
Sims, C. A., Stock J.H. and Watson M.W. (1990) Inference in Linear Time Series Models with Some Unit Roots. Econometrica 58 113-44.
Toda, H. and Yamamoto T. (1995) Statistical Inference in Vector Autoregressions with Possibly Integrated Processes. Journal of Econometrics 66 225-250.
Yildirim, J., Sezgin S. and Ocal N. (2005) Military Expenditure and Economic Growth in Middle Eastern Countries: A Dynamic Panel Data Analysis. Defence and Peace Economics 16 283-295.
Zapata, H. and Rambaldi A. (1997) Monte Carlo Evidence on Cointegration and Causation. Oxford Bulletin of Economics and Statistics 59 285-298.