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Modeling the relationship between defense spending and economic growth for the Fiji Islands

Singh, Baljeet and Narayan, Paresh (2007) Modeling the relationship between defense spending and economic growth for the Fiji Islands. Defense and Peace Economics, 18 (4). pp. 391-401. ISSN 1024-2694

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Abstract

The goal of this paper is to examine the nexus between GDP and military expenditure. We model this relationship within a multivariate framework by including exports in the model. We use the recently developed bounds testing approach to cointegration and find that there is a long run relationship among the variables when GDP is the endogenous variable. Normalizing on GDP and using four different estimators, we find that in the long run both military expenditure and exports have a positive impact on GDP. Finally, using the Granger causality test, we find that there is evidence for military expenditure Granger causing exports and exports Granger causing GDP, implying that military expenditure indirectly Granger causes GDP in the short run. In the long run, we find that both military expenditure and exports Granger cause GDP for Fiji. Our findings are consistent with the Keynesian school of thought, leading us to derive some policy implications.

Item Type: Journal Article
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor
Divisions: Faculty of Business and Economics (FBE) > School of Economics
Depositing User: Ms Mereoni Camailakeba
Date Deposited: 26 Apr 2007 04:51
Last Modified: 18 Jul 2012 15:27
URI: http://repository.usp.ac.fj/id/eprint/3942
UNSPECIFIED

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