An analysis of defence expenditure and economic growth in South Africa

Abstract

This research paper investigates the relationship between defence expenditure and economic growth in South Africa. It is understood that South African Defence Force plays a vital role in peace keeping security in African and SADC as a region. This makes it a particularly interesting case study on nexus between defence expenditure and economic growth. This investigation presents such a study, by estimating an econometric model of the South African military expenditure in considering pure economic factors. The period of the study covers from 1988 to 2012. On the basis of determining the long term equilibrium the application of Johansen cointegration and Engel-Granger were applied. At the later stage the technique of Granger causality was performed on variables of interest in the study. The study concludes that there is long run relationship between defence expenditure and economic growth. Also for causal analysis military expenditure seem to granger cause gross domestic product per capita at 5 percent significance level.