Government expenditures, military spending and economic growth: causality evidence from Egypt, Israel, and Syria

Abstract

This study uses multivariate cointegration and variance decomposition techniques to investigate the causal relationship between government expenditures and economic growth for Egypt, Israel and Syria, for the past three decades. When testing for causality within a bivariate system of total government spending and economic growth, we find bi-directional causality from government spending to economic growth with a negative long-term relationship between the two variables. However, when testing for causality within a trivariate system -the share of government civilian expenditures in GDP, military burden and economic growth -we find that the military burden negatively affects economic growth for all the countries, and that civilian government expenditures cause positive economic growth in Israel and Egypt.Classification: O23, O53, H50, N15.

Does Defence Spending Impede Economic Growth? Cointegration and Causality Analysis for Pakistan

“…Our findings corroborate with the view by Abu-Bader and Abu-Qarm (2003) who reported that a rise in government non-military spending will stimulate the pace of economic growth and in turn, government allocates more resources to productive and efficient ventures to sustain the rate of economic growth. There is also bidirectional causal relation between economic growth and interest rate.…”

“…The seminal work of Benoit (1973Benoit ( , 1978 has spurred an increasing attention on the economic impact of defence spending with the relevant literature steadily expanding ever since (inter alia : Chowdhury, 1991;Dakurah et al, 2001;Sezgin, 2001;Atesoglu, 2002;Dunne et al, 2002;Abu-Bader and Abu-Qarm, 2003;Cuaresma and Reitschuler, 2004;Halicioglu, 2004;Bas, 2005;Yildirim et al, 2005;Kollias et al, 2007;Lee and Chen, 2007;Özsoy, 2008;Wijeweera and Webb, 2009). Broadly speaking, the findings are mixed and inconclusive with results depending on the country or sample of countries, the time period or the methodology used (for a survey of the findings and the issues see Dunne et al, 2005).…”

Military expenditure and economic growth: A meta-analysis

“…Unlike the simultaneous-equation models, they do not impose a priori any causal relationship among milexp and growth. See for instance Joerding (1986), Chowdhury (1991) Dakurah et al (2001, Abu-Bader and Abu-Qarn (2003), Dunne and Nikolaidou (2005), among others. For detailed discussion see Dunne and Smith (2010).…”

Consequential Effects of Defence Expenditure on Economic Growth of Saudi Arabia: 1970-2012

“…Their results suggested that the Turkish defence expenditure determined NATO's defence expenditure, and the short-run estimates have a significant relationship. Abu Bader and Abu Qarn (2003) examine the causality between defence expenditure and economic growth in Egypt, Syria and Israel. They found a negative impact between the military expenditure and economic growth in Egypt and positive caused in Syria and Israel.…”