Global Economy and Finance Journal
Vol. 9. No. 2., September 2016, Pages: 50 – 64
Military Spending and Economic Growth in Arms Exporting Countries
The results of research on the economic impact of military spending are mixed. Furthermore, no study has focused exclusively on arms exporting countries, especially in the 2000s. Therefore, this paper analyzes the relationship between military spending and the economic growth of arms exporting countries. Barro’s (1990) growth model and the generalized method of moments (GMM) estimators are employed to analyze data of 18 arms exporting countries over the time period 1970-2013. The study result shows that the share of military spending has a significantly positive effect on economic growth in arms exporting countries at a 5% level of confidence. This implies that military spending may stimulate economic growth in arms exporting countries. Additionally, it is found that GDP growth has a significantly negative effect on the change in the share of military spending in arms exporting countries at a 5% level of confidence. It implies that economic growth in arms exporting countries affects the share of military spending in arms exporting countries.