Economic Consequences of Lower Military Spending: Some Simulation Results

48 Pages Posted: 15 Feb 2006

See all articles by Tamim Bayoumi

Tamim Bayoumi

International Monetary Fund (IMF); Centre for Economic Policy Research (CEPR)

Daniel Hewitt

affiliation not provided to SSRN

Jerald Schiff

International Monetary Fund (IMF) - European Department

Date Written: March 1993

Abstract

The IMF MULTIMOD model is used to trace the economic impact of a 20 percent reduction in world military expenditures. GDP falls in the short run, however private consumption and investment rise, leading to an increase in GDP in the medium and long run. The estimated gains to economic welfare are substantial, particularly for developing countries, although most of these gains are realized in the long run. A positive international economic externality is found to exist, implying that for any given country the economic gains from a coordinated reduction in military expenditures exceed the gains from a unilateral reduction.

JEL Classification: F47, H56

Suggested Citation

Bayoumi, Tamim and Hewitt, Daniel and Schiff, Jerald, Economic Consequences of Lower Military Spending: Some Simulation Results (March 1993). IMF Working Paper, Vol. , pp. 1-48, 1993. Available at SSRN: https://ssrn.com/abstract=883442

Tamim Bayoumi (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-6333 (Phone)
202-623-4795 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Daniel Hewitt

affiliation not provided to SSRN

No Address Available

Jerald Schiff

International Monetary Fund (IMF) - European Department ( email )

700 19th Street NW
Washington, DC 20431
United States

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