Essay On Military Spending

Literature Review
2.1.1 Military spending and Economic growth:
Military spending is an important issue for the international economy. It is expenditure by the government that influences beyond the resources it takes up, especially when it leads to or facilitates conflict. At the same time most countries needs some level of security to deal with internal and external threats but these can certainly have an opportunity cost as they can prevent money being used for other purposes that might improve the pace of development. The impact of defense spending on the economic growth may be positive or negative depending on the specific argument.
There are various schools of thought on the nature of relationship between the defense sector and economic growth. Military Keynesians Contends that defense expenditure is a tool of

They used macroeconomic variables such a, lending rate, inflation rate, gross capital formation and unemployment rate as well as structural adjustment program (SAP) included dummy variables to capture the impact of policy changes. Cointegration and Vector error correction mechanism where employed to analyze all the variables. The result suggested all the variables have a long run relationship and there was a positive relationship between military expenditure and economic growth in the long run and short run. However the variance decomposition result indicates very little contribution of the military sector to the variable employed. They recommend that the present level of funding of the military should be maintained.
In same light Freda (2001) used new macroeconomic theory and multivariate cointegration procedure, examined defense spending and economic growth in turkey between 1950 and 2002 and found positive long run relationship between aggregate defense spending and aggregate output in the