The economic consequences of defense expenditures in the Middle East.

Date

1994

Author

Looney, Robert E

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Since the Middle East has the highest defense burden (defense expenditures as a share of gross domestic product) in the developing world, it is of some interest to assess the extent military expenditures have influenced national efforts at expanding investment. The purpose of this paper, therefore, is to assess whether military expenditures in five of the major defense spenders, namely Algeria, Egypt, Syria, Israel, and Saudi Arabia, have been at the expense of physical capital accumulation as well as other macroeconomic aggregates. After finding series free of unit roots, the methodology used consisted of a series of Granger Causality tests modified by a Hsiao procedure to identify the optimal timing of impact. While there is little evidence supporting the position that investment or growth causes defense, many countries have developed fairly elaborate feedback mechanisms whereby defense impacts on investment and growth and in turn is affected by that growth. In addition, while there is little evidence that defense hurts investment or growth, there is ample support for the position that: (a) the relationship between defense and investment or growth varies considerably among countries, and (b) the lag structures also differ greatly.

URI

https://hdl.handle.net/11511/108220

Collections

Department of Economics, Article