Correlation of military expenditures and economic growth: lessons for Romania

Abstract

This paper examines the correlation between public policies in the field of military expenditures and economic growth in Romania. The research is built upon the vast literature focused on the field of public policies and economic growth. Whereas economic growth became one of the most dynamic areas in economics, this correlation will consider the determinants of the real sector development through economic phenomenon modeling. The impact of military expenditures on growth is analysed for Romania, using annual data over the period 1991-2016. The research methodology employed is the Granger causality test. The empirical results reveal that there is a bidirectional relationship between military expenditure and GDP over the long run, with a positive effect described by both relationships through several models exemplified in the analysis. From the economic point of view, these results highlight the impact of military expenditures, generating different positive effects on labor, capital, economic growth and efficient use of resources in the economic sector, at the national level.

Does military spending stifle economic growth? The empirical evidence from non-OECD countries

“…The findings of this study are consistent with the study carried out by Knight et al (1996), Hou andChen (2013), andD'Agostino et al (2017), and Saba and Ngepah (2019). While, our results are in contrast with the findings of Narayan and Singh (2007), Feridun et al (2011), Farzanegan (2014, Sheikh et al (2017), andLobont et al (2019), as these studies yield positive relationship between military expenditures and economic growth, also quite consistent with the illustration of the Keynesian school of thought. Mostly military expenditure is unproductive in developing countries.…”

“…Several prior studies have drawn findings that support the Keynesian military view of the positive influence of military expenditure on national output (Benoit, 1978;Khalid and Noor, 2018;Raju and Ahmed, 2019). In a study conducted by Lobont et al (2019), it is ascertained that military spending has several positive effects on capital, labor, growth, and the effectual use of available resources in the economy as a whole.…”

“…Thus, in this study, a multivariate probabilistic model, based on the augmented production function is used to validate empirically the impact of military spending as a percentage of GDP along with some other control variables, including human capital, physical capital, foreign remittances, and the level of development on economic growth proxied by GDP per capita growth rate. Similar growth models encompass military spending is also frequently used in erstwhile research studies, for instance by , Dunne and Nikolaidou (2012), Hou and Chen (2013), Lobont et al (2019), Mohanty et al (2020). The multivariate regression equation used in this study can be expressed symbolically as follows;…”

Military Spending and the Sino-US Arms Race: An Analysis Using Bootstrap ARDL

“…Most empirical studies used panel analysis to test the cointegration and causality between military spending and GDP or normal debt (Lobont et al, 2019). For example, cointegration and error correction have been used to explore this relationship.…”

Impact of Military Expenditure on Economic Growth of Afghanistan

“…And after the completion of research, Hou and Chen (2013) concluded and remarked that an arms expense has an indirect and significant impact on economic growth in the sample countries. Lobont, Glont, Badea, and Vatavu, (2019) did research related to the association among military expenses and economic growth in Romania. And this research is done by using annual data from the period of 1991-2016.…”