The Causal Relationship between Corruption, Military Expenditures and Economic Growth in Egypt

Abstract

This paper aims to assess the relationship military expenditure and corruption and measure the impact of military expenditure on economic growth during the period 1981-2010 . The Autoregressive Distributed Lag (ARDL) models are used to solve the problems that arise in carrying such models that involve macroeconomic variables. The main findings report that military expenditures inversely affect economic growth. However military spending contributes positively to corruption. The results also state that exports, foreign direct investment and gross capital formation have positive effects on economic growth in Egypt in the considered period. For the corruption model, the results report that the education level and foreign direct investment are inversely correlated to corruption. Furthermore, globalization and government intervention are found to have positive effects on corruption levels in the economy and are the main determinants of corruption beside military expenditures in the Egyptian economy.