The Relationship between Defense Spending and Economic Growth: The Case of Turkey

Article Information
Journal: Business and Economics Research Journal
Title of Article: The Relationship between Defense Spending and Economic Growth: The Case of Turkey
Author(s): Ceylan Karakaya, Tuba Sahinoglu
Volume: 11
Number: 2
Year: 2020
Page: 335-351
ISSN: 2619-9491
DOI Number: 10.20409/berj.2020.253
Defense spending is an important factor in ensuring the internal and external security of the country. The threats created by different countries or regions for each other cause them to turn to defense spending. Defense expenditures which are carried out to protect national security, have significant effects on the national economy as well. Therefore, the aim of working is to examine the relationship between defense spending and economic growth for Turkish economy. For this purpose, the presence and direction of the impact of defense spending on economic growth in Turkey, was investigated using the 1984-2016 annual data by ARDL (Autoregressive Distributed Lag Model) Bounds Test and Johansen Cointegration Test. Technological development variable is also included in the analysis. Johansen cointegration test results suggests the existence of a negative relationship in the long term for Turkey’s economy. The results of ARDL bounds test show that both defense expenditures and technological change have a positive effect on economic growth in the long and short term. On the other hand, according to Granger causality test results, there is a bidirectional causality relationship between defense expenditures and economic growth.

Keywords: Public Expenditures, Defense Expenditures, Economic Growth, ARDL Bounds Test, Johansen Cointegration Test

JEL Classification: C32, H56, O38 Full Text