A panel data analysis of the nexus between defence spending and growth in the European Union

Abstract

The nexus between economic growth and military expenditure has attracted considerable attention and has been the subject of extensive theoretical and empirical work. Given the move towards the development of a Common European Security and Defence Policy (CESDP), this paper, using panel data analysis, addresses the causal ordering issue between growth and defence spending in the case of the European Union (EU15). Results reported herein suggest the presence of a positive feedback between growth and military expenditure in the long run and a positive impact of the latter on growth in the short run.