Military expenditure, foreign direct investments and economic growth: a cross-country analysis of thea ASEAN region
Date
2019-05
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Abstract
Using a panel data of the ASEAN countries for the period 2008 to 2017, we
analyzed the effect of military expenditure on economic growth. Two possible
channels by which military expenditure affects growth are considered. First, a direct
causal pathway shows that the impact of military spending on growth is stimulated
by the government. Second, an indirect effect presents FDI as a causal pathway of
military expenditure to growth. Four models were used to look into the relationships
between the three variables. Results show that military expenditure does not have a
direct effect on growth. However, it does have an indirect effect. As military spending
increases, FDI inflow decreases. Moreover, FDI spurs growth. This shows that military
expenditure has a negative effect on economic growth when FDI acts as a causal
pathway.
Description
Keywords
ASEAN, economic growth, military expenditure, foreign direct investment