Sovereign Debt, Deficits and Defence Spending: The Case of Greece

Defence and Peace Economics, Forthcoming

35 Pages Posted: 27 Feb 2017

See all articles by Ourania Dimitraki

Ourania Dimitraki

University of Bedfordshire; University of Essex - Essex Business School

Aris Kartsaklas

Brunel University London

Date Written: January 30, 2017

Abstract

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

Dimitraki, Ourania and Kartsaklas, Aris, Sovereign Debt, Deficits and Defence Spending: The Case of Greece (January 30, 2017). Defence and Peace Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2923751

Ourania Dimitraki (Contact Author)

University of Bedfordshire ( email )

Vicarage St
Luton, LU1 3JU
United Kingdom

University of Essex - Essex Business School ( email )

Elmer Approach Southend on Sea
Essex, SS11LW
United Kingdom

Aris Kartsaklas

Brunel University London ( email )

Kingston Lane
Uxbridge, Middlesex UB8 3PH
United Kingdom

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