Sovereign Debt, Deficits and Defence Spending: The Case of Greece
Defence and Peace Economics, Forthcoming
35 Pages Posted: 27 Feb 2017
Date Written: January 30, 2017
The outbreak of the sovereign debt crisis at the end of 2009 in Greece led to a severe recession, and constant economic problems. This paper investigates military expenditure among others as a potential factor to the growth of sovereign debt in Greece over the period 1960 until currently. Our empirical findings suggest that high deficits, inflation and military spending have been the primary causes of debt growth in Greece. The structural break models reveal a much higher effect of deficits and inflation in the post-1990 period while the threshold switching regression, based on the level of sovereign debt, indicate that for levels of debt-to-GDP ratio above 90% deficits, inflation and military expenditures had significantly more pronounced effects on government debt changes.
Keywords: Military Expenditure, Sovereign Debt, Public Finance, Non-Linear, Greece
JEL Classification: H56, H63
Suggested Citation: Suggested Citation