Modeling the Defense-Growth Nexus in a Post-Conflict Country: A Piecewise Linear Approach

University of Goettingen, Ibero-America Institute for Economic Research Discussion Paper No. 97

25 Pages Posted: 19 Jul 2004

See all articles by Gerhard Reitschuler

Gerhard Reitschuler

University of Innsbruck

Josef Ludger Loening

University of Goettingen (Gottingen) - Ibero-America-Institute for Economic Research

Date Written: February 2004

Abstract

The defense-growth nexus is investigated empirically using longitudinal data for Guatemala and allowing the effect of defense spending on growth to be nonlinear. Using recently developed econometric methods involving threshold regressions, evidence of a level-dependent effect of military expenditure on GDP growth is found: a positive and significant externality effect of defense spending prevails for relatively low levels of defense spending and becomes negative, albeit insignificant, for higher levels.

Keywords: Guatemala, defense expenditures, nonlinearity, economic growth, externality effect

JEL Classification: E13, C22, H56

Suggested Citation

Reitschuler, Gerhard and Loening, Josef Ludger, Modeling the Defense-Growth Nexus in a Post-Conflict Country: A Piecewise Linear Approach (February 2004). University of Goettingen, Ibero-America Institute for Economic Research Discussion Paper No. 97. Available at SSRN: https://ssrn.com/abstract=565141 or http://dx.doi.org/10.2139/ssrn.565141

Gerhard Reitschuler (Contact Author)

University of Innsbruck ( email )

Universit├Ątsstra├če 15
Innsbruck, Innsbruck 6020
Austria

Josef Ludger Loening

University of Goettingen (Gottingen) - Ibero-America-Institute for Economic Research ( email )

Oeconomicum II/99
Platz der Goettinger Sieben 3
Goettingen, 37073
Germany
+49 (551) 39-8172 (Phone)
+49 (551) 39-8173 (Fax)

HOME PAGE: http://www.iai.wiwi.uni-goettingen.de

Register to save articles to
your library

Register

Paper statistics

Downloads
53
Abstract Views
905
rank
376,086
PlumX Metrics