The Interrelationship Between Defence Expenditure and Economic Development in The United States and The United Kingdom
The paper has aimed to explore the interrelationship between defence expenditure and economic development in the United States (US) and the United Kingdom (UK) during the period of 1980 – 2017. The author has applied total expenditure approach analyzing defence – economic development nexus. To extend investigation over the countries, correlation analysis and Granger causality have been used. In this research, a positive and statistically significant relationship between defence expenditure and economic development has been found in both countries. In addition, the intensity rate of structural changes has shown, thatUS has more stable structure of defence expenditure than UK. Furthermore, the pairwise Granger test has revealed unidirectional causality running from defence expenditure to economic development in US. Moreover, the case of UK has shown that economic development may impact on defence expenditure. Finally, from a policy maker’s perspective, the findings of this research could provide important policy implications for the countries under consideration.
Keywords - Structural Changes, Correlation, Defence Expenditure, Economic Development, Granger Causality.