The Defense-growth nexus: An application for the Israeli-Arab conflict

Abu-Qarn, Aamer (2010): The Defense-growth nexus: An application for the Israeli-Arab conflict.

Abstract

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
• Language: English
• Keywords: Growth, Middle East, Israeli-Arab conflict, Causality, Generalized Forecast Error Variance Decomposition
• Subjects: O - Economic Development, Innovation, 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

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