The Impact of Military Spending on The Economic Growth of Arab Spring Countries

Abstract

The present research explores dynamics of expenses on military and economic growth in four major Arab spring countries by using data from a balanced panel in a period from 2000 to 2014. Results of Kao cointegration report on the existence of long-run equilibrium in the relationship between economic growth and spending on military in all the countries. The FMOLS reports revealed a significant positive effect of military expenditure on economic growth of all four north Arab African countries (Libya, Egypt, Tunisia, Yemen and Iraq). For long-term Granger causality, this study adopted the panel vector error correction mechanism (P-VECM). Results indicated that in the long-term, not all countries have had Granger causality running from economic growth to military expenditure or vice-versa. The present research concludes that spending in the military division in the respective countries is in long-term not essential for the economic growth. While growth of GDP resulted in military expenditure in the short run, military expenditure does not show any short-term effect on the growth of GDP.