The Empirical Analysis of The Relationship Between Military Expenditure and Economic Growth in Asean Countries
This paper aims at investigating the relationship between military expenditure and economic growth in nine ASEAN countries using annual data from 2000 to 2015. The variables include military expenditure, employee, investment and economic growth. Four unit root test results indicate that data are stationary in the first difference I(1). Pedroni (2004) test results show there is an existence of cointegration among the variables. Furthermore, we conduct FMOLS (fully modified ordinary least squares) and DOLS (dynamic ordinary least squares) to know whether there is a long-run effect from variables to economic growth. Both FMOLS and DOLS tests show that the variables have a significant positive impact on economic growth. In addition, VECM test results show that military expenditure and investment have short-run direct effect to GDP. Meanwhile, error correction term results indicate that a bidirectional flow happens between GDP and military expenditure. From policy perspective, our results support the argument that military expenditure has influence to economic growth.
Keywords- economic growth, military expenditure, ASEAN, panel data analysis