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

Abstract

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.

A cross-regional analysis of military expenditure, state fragility and economic growth in Africa

“…While it further validates the (i) business led MILEX, (ii) income led MILEX, and (iii) military led trade openness in a panel of G-7 countries. Zhong et al (2015) considers the case study of G7 countries for analysing the militarygrowth nexus and unable to find the consistent causal estimates among the member countries. Kollias et al (2017) explores the nexus between defence spending, economic growth, and investment for Latin American countries between 1961 and 2014 by employing both linear and nonlinear tests.…”

The nexus between military expenditures and economic growth in the BRICS and the US: an empirical note

“…In order to test the null hypothesis of slope coefficient homogeneity against the alternative hypothesis, the familiar approach is to apply the Wald principle. Details on the cross-sectional dependence and slope homogeneous tests, interested readers can refer to Chang et al, (2014), Chang and Tsai (2015), Pan et al, (2015), and Zhong et al, (2015).…”

The Relationship between Defense Expenditures and Employment in NATO Member States: Bootstrap Panel Causality Test

“…However, when the results were evaluated in general, the study emphasized that there were very few findings regarding the causality between defense expenditures and unemployment rates. Zhong, Chang, Tang, and Wolde-Rufael (2015) analyzed the relationship between defense expenditures and unemployment in G7 countries using the panel bootstrap causality method. They revealed a unilateral causality relationship from defense expenditures to unemployment in Canada, Japan and the United States, while they found a unilateral causality relationship from unemployment rates to defense expenditures in France and Germany.…”