Farzanegan, Mohammad Reza (2011): Military spending and economic growth: the case of Iran.
Download (597kB) | Preview
Iranian government budget on military over the last decade has been higher than the average of the world. The current increasing international sanctions aim to reduce the military capabilities and capacities of the Iranian government. In this study, we analyze the response of the Iranian economy to shocks in its military budget from 1959-2007, using Impulse Response Functions (IRF) and Variance Decomposition Analysis (VDA) techniques. The Granger causality results show that there is unidirectional causality from military spending to the economic growth. The response of income growth to increasing shocks in the military budget is positive and statistically significant.
|Item Type:||MPRA Paper|
|Original Title:||Military spending and economic growth: the case of Iran|
|Keywords:||Military spending; Economic growth; VAR model; Impulse Response; Sanctions; Iran|
|Subjects:||H - Public Economics > H5 - National Government Expenditures and Related Policies > H50 - General
H - Public Economics > H5 - National Government Expenditures and Related Policies > H56 - National Security and War
C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes
|Depositing User:||Mohammad Reza Farzanegan|
|Date Deposited:||20. Dec 2011 21:25|
|Last Modified:||23. Apr 2015 15:48|
Abu-qarn, A.S., 2010. The defence–growth nexus revisited: evidence from the Israeli–Arab conflict. Defence and Peace Economics 21, 291-300.
Alfoneh, A., 2010. The revolutionary guards’ looting of Iran’s economy. Middle Eastern Outlook 3, 1-9.
Askari, H., Mohseni, A., Daneshvar, S., 2009. The Militarization of the Persian Gulf. Edward Elgar: Cheltenham.
Asseery, A. A., 1996. Evidence from time series on militarising the economy: the case of Iraq. Applied Economics 28, 1257–1261.
Atesoglu, H.S., 2002. Defense spending promotes aggregate output in the United States – evidence from cointegration analysis. Defence and Peace Economics 13, 55–60.
Benoit, E., 1973. Defence and Economic Growth in Developing Countries. Lexington Books: Boston.
Benoit, E., 1978. Growth and defence in LDCs. Economic Development and Cultural Change 26, 271–280.
Berument, H., Ceylan, N.B., Dogan, N., 2010. The impact of oil price shocks on the economic growth of the selected MENA countries. The Energy Journal 31, 149-176.
CBI, 2011. Annual National Accounts of Iran. Central Bank of the Islamic Republic of Iran, Economic Accounts Department. Available at: http://www.cbi.ir/simplelist/5796.aspx
Chan, S., 1988. Defense burden and economic growth: unraveling the Taiwanese enigma. The American Political Science Review 82, 913 – 920.
Chowdhury, A. R., 1991. A causal analysis of defense spending and economic growth. Journal of Conflict Resolution 35, 80–97.
Dakurah, A.H., Davies, S.P., Sampath, R.K., 2000. Defense spending and economic growth in developing countries: a causality analysis, Journal of Policy Modeling 23, 651-658.
Deger, S., 1986. Military Expenditure and Third World Countries: The Economic Effect. Routledge and Kegan Paul: London.
Dickey, D.A., Fuller, W.A., 1979. Distribution of the estimators for autoregressive time series with a unit root. Journal of the American Statistical Association 74, 427–431.
Dicle, B., Dicle, M.F., 2010. Military spending and GDP growth: is there a general causal relationship?, Journal of Comparative Policy Analysis: Research and Practice 12, 311-345.
Doornik, J. A., Hansen, H., 2008. An omnibus test for univariate and multivariate normality. Oxford Bulletin of Economics and Statistics 70, 927-939.
Dunne, P., Nikolaidou, E., Smith, R. P., 2002. Military spending, investment and economic growth in small industrializing economies. The South African Journal of Economics 70, 1–27.
Dunne, P., Nikolaidou, E., Vougas, D., 2001. Defence spending and economic growth: a causal analysis for Greece and Turkey. Defence and Peace Economics 12, 5–26.
Dunne, P., Smith, R.P., Willenbockel, D., 2005. Models of military expenditure and growth: a critical review. Defence and Peace Economics 16, 449-461.
Dunne, J. P., Vougas, D., 1999. Military spending and economic growth in South Africa. Journal of Conflict Resolution 43, 521–537.
Farzanegan, M.R., 2009. Illegal trade in the Iranian economy: evidence from structural equation model, European Journal of Political Economy 25, 489-507.
Farzanegan, M.R., 2011. Oil revenue shocks and government spending behavior in Iran, Energy Economics 33, 1055-1069.
Farzanegan, M.R., Markwardt, G., 2009. The effects of oil price shocks on the Iranian economy. Energy Economics 31, 134-151.
Feridun, M., Sawhney, B., Shahbaz, M., 2011. The impact of military spending on economic growth: the case of north Cyprus. Defence and Peace Economics 22, 555-562.
Gupta, S., de Mello, L., Sharan, R., 2001. Corruption and military spending. European Journal of Political Economy 17, 749-777.
Kollias, C., Mylonidis, N., Paleologou, S-M., 2007. A panel data analysis of the nexus between defence spending and growth in the European Union. Defence and Peace Economics 18, 75-85.
Kollias, C., Manolas, G., Paleologou, S-M., 2004b. Defence expenditure and economic growth in the European Union: A causality analysis. Journal of Policy Modeling 26, 553-569.
Kollias, C., Naxakisb, C., Zarangasb, L., 2004a. Defence spending and growth in Cyprus: a causal analysis. Defence and Peace Economics 15, 299-307.
Lebovic, J. H., Ishaq, A., 1987. Military burden, security needs and economic growth in the Middle East. Journal of Conflict Resolution 31, 106 – 138.
Lütkepohl, H. 1991. Introduction to Multiple Time Series Analysis. Springer-Verlag: New York.
Malizard. J., 2010. Causality between economic growth and military expenditure: the case of France. Defense & Security Analysis 26, 401-413.
Mintz, A., Huang, C., 1990. Defense expenditures, economic growth and the peace dividend. American Political Science Review 84, 1283–1293.
Pesaran, M. H., Shin, Y., 1998. Generalised impulse response analysis in linear multivariate models. Economics Letters 58, 17-29.
Phillips, P.C.B., Perron, P., 1988. Testing for a unit root in time series regression. Biometrika 75, 335–346.
QMS, 2010. EViews 7 User’s Guide II. Quantitative Micro Software, LLC, Irvine CA.
Ram, R., 1993. Conceptual linkages between defence spending and economic growth and development: a selective review. In: Payne, J.E., Sahu A.P. (Eds.). Defence Spending and Economic Growth. Oxford: Westview, pp.19–39.
Runkle, D.E., 1987. Vector autoregression and reality. Journal of Business and Economic Statistics 5, 437–442.
Scheetz, T., 1991. The macroeconomic impact of defence expenditures: some economic evidence for Argentina, Chile, Paraguay and Peru. Defence Economics 3, 65–81.
Sims, C.A., 1980. Macroeconomics and reality. Econometrica 48, 1-48.
Sims, C.A., Zha, T., 1999. Error bands for impulse responses. Econometrica 67, 1113–1156.
SIPRI, 2010. Media Background—Military expenditure. SIPRI Yearbook 2010. Available at: http://www.sipri.org/media/pressreleases/2010/pressreleasetranslations/storypackage_milex (11May 2011)
Stock, J.H., Watson, M. W., 2001. Vector autoregressions. Journal of Economic Perspectives 15, 101-115.
Wijeweera A., Webb, M.J., 2011. Military spending and economic growth in south Asia: a panel data analysis. Defence and Peace Economics 22, 545-554.
World Bank, 2011. Word Development Indicators. Online Database. Washington DC.
Yildirim, J., Sezgin, S., Öcal, N., 2005. Military expenditure and economic growth in Middle Eastern countries: a dynamic panel data analysis. Defence and Peace Economics 16, 283–295.