Research Journal of Finance and Accounting
The Impact of Military Spending on Economic Growth: Evidence from the US Economy
Abstract
The impact of military spending on gross domestic product (GDP) growth is not clear and deserves detailed empirical analysis in order to discern which one (if any) of the effects prevails: do defense expenditures have an externality effect on an economy, specifically with regard to technological progress, infrastructure, and human capital formation or do they crowd out resources for investment and consumption, thereby hindering economic growth? The present study aims at investigating the relationship between military expenditures and economic growth in United States Of America (USA) using the Autoregressive Distributed Lag (ARDL) bounds testing approach to cointegration tests for the period from 1970 to 2011. The results suggest that, there is the negative relationship between military expenditure and economic growth.
Keywords: New Macroeconomic Model; Military expenditures; Economic growth, ARDL; USA.
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ISSN (Paper)2222-1697 ISSN (Online)2222-2847
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