Impact of Military Expenditure and Economic Growth on External Debt: New Evidence from a Panel of SAARC Countries

This paper examines the impact of military expenditure and economic growth on external debt for a panel of five selected SAARC countries including Bangladesh, India, Nepal, Pakistan and Srilanka, over the period of 1988-2008. Using Pedroni's (2004) test for panel cointegration, it was found tha...

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Bibliographic Details
Published in:Journal of Economic and Social Studies (Online) 2013-10, Vol.3 (2), p.131-149
Main Authors: Zaman, Khalid, Shah, Iqtidar Ali, Khan, Muhammad Mushtaq, Ahmad, Mehboob
Format: Article
Language:English
Subjects:
Causality
Debt service
Defense spending
Econometrics
Economic growth
Economic models
Expenditures
External debt
GDP
Gross Domestic Product
Growth rate
Independent variables
Literature reviews
Studies
Terms of trade
Variables
Citations: Items that cite this one
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Summary:This paper examines the impact of military expenditure and economic growth on external debt for a panel of five selected SAARC countries including Bangladesh, India, Nepal, Pakistan and Srilanka, over the period of 1988-2008. Using Pedroni's (2004) test for panel cointegration, it was found that there is a long-run relationship between external debt, economic growth and military expenditure. The study finds that external debt is elastic with respect to military expenditure in the long run and inelastic in the short run. In the long run, 1% increase in military expenditure increase external debt between 1.18% and 1.24%, while 1% increases in economic growth reduce external debt between 0.64% and 0.79%, by employed DOLS and FMOLS estimator respectively. In the short run, 1% increase in military expenditure increases external debt by 0.15%, while 1% increase in economic growth reduces external debt by 0.47%. [PUBLICATION ABSTRACT]
ISSN:1986-8499
1986-8502
DOI:10.14706/JECOSS11329