Testing the Validity of Keynesian Military Model of Fiscal Side in Case of Pakistan

Authors

  • Ahmed Gulzar PhD scholar in Economics, Department of Economics, University of Management and Technology, Lahore, Pakistan
  • Allah Ditta Assistant Professor of economics, Govt. College Township, Lahore, Higher Education Department, Govt. of the Punjab, Pakistan
  • Hafeez ur Rehman Chairman Department of Economics , University of Management and Technology, Lahore, Pakistan
  • Naghmana Ghafoor Lecturer, Department of Economics, Lahore College for Women University, Lahore, Pakistan

DOI:

https://doi.org/10.47067/reads.v6i3.255

Keywords:

Military Expenditure, Imports, Unemployment, FDI, Population, Pakistan’s Economy

Abstract

The objective of the study was to determine the impact of national security expenditures (military expenditures) on economic growth. Time series data from 1981 to 2018 on annual frequency on GDP growth rate, military expenditures as percentage of GDP, imports as percentage of GDP, unemployment rate, FDI as percentage of GDP and percentage of population living in agglomeration cities taken from online World Development Indicators. Johansen Co-integration and VECM methodology are applied to check the long run relationship and to get the long run and short run coefficient values. The major findings of this study explain that there is found the positive and significant relationship between military expenditures and economic growth of Pakistan both in long run and in short run. It explains that military expenditures are the key driver of economic growth both in short run and in the long run. The impact of imports on GDP growth was also found to be positive and significant both in long run and in short run. The impact of FDI is found positive and significant both in the long run and in the short run. The impact of migration of population to agglomeration cities have huge impact on growth were observed. The impact of unemployment was found to be negative on economic growth in short run.

References

Ando, Shio (2009), The impact of defense expenditure on economic growth: Panel data analysis based on the Feder Model. The International Journal of Economic Policy Studies, Volume 4(8), pp. 141-154.

Aslam, Rabia (2007), Measuring the peace dividend: Evidence from developing economies. Defence and Peace Economics, Volume 18(1), pp. 39-52.

Batchelor, P., P. Dunne and G. Lam (2002), The demand for military spending in South Africa. Journal of Peace Research, Volume 39(3), pp. 339-354.

Joerding, W. (1986), Economic growth and defense spending: Granger causality. Journal of Development Economics, Volume 21(1), pp. 35-40.

Hou, Na (2009), Arms Race, Military Expenditure and Economic Growth in India. Ph.D. thesis, Department of Economics, The University of Birmingham.

Khan, Mahmood-ul-Hasan (2004), Defense expenditure and macroeconomic stabilization: Causality evidence from Pakistan. SBP Working Paper Series, No. 6.

Lai, Ching-chong, Jhy-yuan Shieh and Wen-Ya Chang (2002), Endogenous growth and defense expenditures: A new explanation of the Benoit Hypothesis. Defence and Peace Economics, Volume 13(3), pp. 179-186.

Looney, Robert (1989), Impact of arms production on income distribution and growth in the Third World. Journal of Economic Development and Cultural Change, Volume 38(1), pp. 145-153.

Tahir, Rizwan and G. M. Sajid (1999), Defence spending and economic growth in less developed countries: Re-examining the issue of causality. Government College Economic Journal, Vol 32(1&2), pp. 27-39.

Downloads

Published

2020-09-30

How to Cite

Gulzar, A. ., Ditta, A. ., Rehman, H. ur ., & Ghafoor , N. . (2020). Testing the Validity of Keynesian Military Model of Fiscal Side in Case of Pakistan. Review of Economics and Development Studies, 6(3), 675-686. https://doi.org/10.47067/reads.v6i3.255