Military Expenditure and Unemployment Rates: Granger Causality Tests Using Global Panel Data

Tang, Jenn-Hong; Lai, Cheng‐chung; Lin, Eric S.

doi:10.1080/10242690903105257

Cited by 33 publications

(14 citation statements)

References 30 publications

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“…Dunne and Smith (1990) report that the sample dynamic reduced form regressions estimates do not indicate that military spending share has a significant effect on the unemployment rate for the US and the UK, and pooled post-war data for 11 OECD countries. Tang et al (2009) observe that the causality running from military spending to unemployment is not statistically significant if military spending is measured by per capita military expenditure, however, it is significant predominantly for low-income and non-OECD countries, if it is measured by the military burden for 23 OECD and 23 non-OECD countries during 1988-2004. Mpanju (2012 reveals that there is a close positive linkage between FDI and employment in Tanzania during 1990-2008.…”

Section: Introductionmentioning

confidence: 91%

Military Expenditures and Unemployment Nexus for Selected South Asian Countries

et al. 2015

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The objective of the study is to examine the relationship between military expenditures and unemployment rate in the panel of selected SAARC countries namely India, Nepal, Pakistan and Sri Lanka over the period ranging from 1990 to 2013. In particular, the study used multivariate framework to examine the long-run relationship between military expenditures and unemployment rate by taking into account the effect of macroeconomic variables namely energy consumption, GDP per capita, Foreign Direct Investment (FDI) net inflows and population growth rate. The empirical results show that all the variables exhibit non-stationary behavior and have long-run relationships between them. The results of panel DOLS show that military expenditures favor the employment rate in the SAARC region, as the estimated coefficient of military expenditure has a negative and more elastic relationship with the unemployment rate. Other factors i.e., energy consumption, GDP per capita and incoming FDI significantly decreases the unemployment rate in the SAARC region. However, population growth rate does not exhibit significant association with the unemployment rate during the period under the study. In a second regression apparatus, energy consumption, and GDP per capita significantly decrease the military spending, however, population growth rate significantly increases the military expenditures in the region. The results of causality indicate that there is an inverse causality between energy consumption, GDP per capita and population growth rate with the unemployment rate, while there is no significant causation between military spending and the rest of the variables in the short-run. In the long-run, there is a significant causation between the variables with the exception of population growth rate in SAARC region. These results are valuable both for policy makers and government officials to formulate their strategic polices for SAARC countries.

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Section: Introductionmentioning

confidence: 91%

Military Expenditures and Unemployment Nexus for Selected South Asian Countries

et al. 2015

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“…Prior studies such as Paul (1996) and Tang, Lai, and Lin (2009) found that different countries show different causality directions between military spending and unemployment. This suggests that the military spending-unemployment relationship may be country specific, and thus, it is necessary to recognize the heterogeneous nature of the countries under investigation.…”

Section: Introductionmentioning

confidence: 97%

“…Using Taiwanese data, Huang and Kao (2005) find that defense spending negatively affects employment growth in the short run, but positively in the long run. Wing (1991) finds that defense spending gives rise to considerable employment in Indonesia between 1978and 1980. Tang, Lai, and Lin (2009 investigates the relationships between military expenditure and unemployment rates for a global panel data on 46 countries and they found that there was a little evidence of the causality running from unemployment to military expenditure regardless of how they measured military spending and country classifications.…”

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confidence: 97%

The causal nexus between military spending and unemployment in the G7: a bootstrap panel causality test

Zhong¹,

Chang²,

Tang³

et al. 2015

Defence and Peace Economics

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We revisit the causal relationship between military spending and unemployment in the G7 countries applying a bootstrap panel causality analysis that accounts for both cross-sectional dependence and for heterogeneity across countries. Using per capita real GDP as a controlled variable, we found a unidirectional causality running from military spending to unemployment for Canada, Japan, and the US, one-way causality running from unemployment to military spending for France and Germany, and bidirectional causality for Italy and the UK. The empirical evidence does not seem to provide consistent results regarding the causal relationship between military spending and unemployment in G7 countries.

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“…The lag order is chosen by the Schwarz Bayesian Information Criterion, which chooses one lag for all countries except the US, where two lags are chosen. Above the countries were treated individually, but much of the recent work on military expenditures and GC has treated the multiple countries as a panel (e. g. Tang et al, 2009). Testing for GC in panels raise a range of further econometric issues.…”

Section: Other Countriesmentioning

confidence: 99%

“…For instance, Dunne and Smith (1990), in the first issue of this journal, could not reject the hypothesis of GNC in both directions between the share of military expenditure and unemployment in a sample of OECD countries. Tang et al (2009) also test for GNC using global panel data and find no evidence for GC from unemployment to military expenditure, but some evidence for GC from military expenditure to unemployment for non-OECD countries. There are also many studies testing GNC between military expenditure and other economic variables, particularly output; early examples being Joerding (1986), Kinsella (1990), Chowdhury (1991), Chen (1993) with more recent examples being Abu-Bader and Abu-Qarn (2003) and Kollias et al (2004Kollias et al ( , 2007, who also take account of the possibility of cointegration.…”

Section: Introductionmentioning

confidence: 99%

Military Expenditure and Granger Causality: A Critical Review

Dunne

Smith

2010

Defence and Peace Economics

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A large literature has used tests for Granger (1969) non-causality, GNC, to examine the interaction of military spending with the economy. Such tests answer a specific although quite limited question: can one reject the null hypothesis that one variable does not help predict another? If one can reject, there is said to be Granger causality, GC. Although the limitations of GNC tests are well known, they are often not emphasised in the applied literature and so may be forgotten. This paper considers the econometric and methodological issues involved and illustrates them with data for the US and other countries. There are three main issues. First, the tests may not be informative about the substantive issue, the interaction of military expenditure and the economy, since Granger causality does not correspond to the usual notion of economic causality. To determine the relationship of the two notions of causality requires an identified structural model. Second, the tests are very sensitive to specification. GNC testing is usually done in the context of a vector autoregression, VAR, and the test results are sensitive to the variables and deterministic terms included in the VAR, lag length, sample or observation window used, treatment of integration and cointegration and level of significance. Statistical criteria may not be very informative about these choices. Third, since the parameters are not structural, the test results may not be stable over different time periods or different countries.Military spending, Economic growth, Causality, VAR,

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Military Expenditure and Unemployment Rates: Granger Causality Tests Using Global Panel Data

Cited by 33 publications

References 30 publications

Military Expenditures and Unemployment Nexus for Selected South Asian Countries

Military Expenditures and Unemployment Nexus for Selected South Asian Countries

The causal nexus between military spending and unemployment in the G7: a bootstrap panel causality test

Military Expenditure and Granger Causality: A Critical Review

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