Military spending and economic growth relationship in the case of France, ARDL and causality analysis

Abstract

Over the last 3 decades, there has been a remarkable amount of empirical study on the defense-growth relationship, applying various models and econometric methods by concentrating on individual case researches, time series, and panel data studies or cross country investigations. In spite of the number and the diversity of researchers, the evidence of the defense-growth correlations are still far from conclusive. In addition, few studies have focused on the case of France. To fill in the gap in the literature, this paper employs an autoregressive distributed lag and granger causality test to provide empirical evidence on the economic effects of defense expenditure between 1970–2010. All in all, the result derived from autoregressive distributed lag (ARDL) is consistent and suggests that significant and positive correlation exist between economic and military sector in both short and long term. The Granger causality result outcomes show a unidirectional relation running from gross domestic product per capita to the defense expenditure. This is an indicated that gross domestic product is very significant to the defense sector in France.