{"title":"Investigating Time-Varying Causality Between Military Spending and Macroeconomic Indicators in the United States","authors":"Isiaka Akande Raifu, Joshua Adeyemi Afolabi","doi":"10.1515/peps-2023-0044","DOIUrl":null,"url":null,"abstract":"Abstract Military expenditures constitute a large chunk of the United States’ annual budget and its macroeconomic implications had been modelled using the Granger causality test, which suffers power loss when variables are subjected to structural breaks. This study explored alternative approaches by applying both traditional VAR-based Granger causality and the time-varying causality test techniques to obtain new evidence on the causality between military spending and selected macroeconomic indicators (economic growth, investment, unemployment and inflation rate) in the United States. Relevant data covering 1972Q1–2021Q2 were analysed. The results of the VAR-based Granger Causality test are dominated by a unidirectional causality that runs from macroeconomic variables to military spending and the result are robust to alternative military spending measures. However, the results of the time-varying causality method show that bidirectional causality dominates the relationship between military spending and some macroeconomic indicators, especially economic growth, investment and unemployment. With the variance observed in the causality between military spending and macroeconomic indicators, policymakers need to moderate military spending to achieve desired economic outcomes.","PeriodicalId":44635,"journal":{"name":"Peace Economics Peace Science and Public Policy","volume":null,"pages":null},"PeriodicalIF":1.7000,"publicationDate":"2023-11-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Peace Economics Peace Science and Public Policy","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.1515/peps-2023-0044","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"POLITICAL SCIENCE","Score":null,"Total":0}
引用次数: 0
Abstract
Abstract Military expenditures constitute a large chunk of the United States’ annual budget and its macroeconomic implications had been modelled using the Granger causality test, which suffers power loss when variables are subjected to structural breaks. This study explored alternative approaches by applying both traditional VAR-based Granger causality and the time-varying causality test techniques to obtain new evidence on the causality between military spending and selected macroeconomic indicators (economic growth, investment, unemployment and inflation rate) in the United States. Relevant data covering 1972Q1–2021Q2 were analysed. The results of the VAR-based Granger Causality test are dominated by a unidirectional causality that runs from macroeconomic variables to military spending and the result are robust to alternative military spending measures. However, the results of the time-varying causality method show that bidirectional causality dominates the relationship between military spending and some macroeconomic indicators, especially economic growth, investment and unemployment. With the variance observed in the causality between military spending and macroeconomic indicators, policymakers need to moderate military spending to achieve desired economic outcomes.
期刊介绍:
The journal accepts rigorous, non-technical papers especially in research methods in peace science, but also regular papers dealing with all aspects of the peace science field, from pure abstract theory to practical applied research. As a guide to topics: - Arms Control and International Security - Artificial Intelligence and Cognitive Studies - Behavioral Studies - Conflict Analysis and Management - Cooperation, Alliances and Games - Crises and War Studies - Critical Economic Aspects of the Global Crises - Deterrence Theory - Empirical and Historical Studies on the Causes of War - Game, Prospect and Related Theory - Harmony and Conflict - Hierarchy Theory