Testing the Validity of Keynesian Military Model of Fiscal Side in Case of Pakistan

• Published in: Review of economics and development studies (Online) 2020-01, Vol.6 (3), p.675-686
• Main Authors: Gulzar, Ahmed, Ditta, Allah, Rehman, Hafeez ur, Ghafoor, Naghmana
• Format: Article
• Language: English
• Subjects: Economic growth; Expenditures; GDP; Gross Domestic Product; Unemployment
• ISSN: 2519-9692; 2519-9706
• DOI: 10.47067/reads.v6i3.255

The objective of the study was to determine the impact of national security expenditures (military expenditures) on economic growth. Time series data from 1981 to 2018 on annual frequency on GDP growth rate, military expenditures as percentage of GDP, imports as percentage of GDP, unemployment rate, FDI as percentage of GDP and percentage of population living in agglomeration cities taken from online World Development Indicators. Johansen Co-integration and VECM methodology are applied to check the long run relationship and to get the long run and short run coefficient values. The major findings of this study explain that there is found the positive and significant relationship between military expenditures and economic growth of Pakistan both in long run and in short run. It explains that military expenditures are the key driver of economic growth both in short run and in the long run. The impact of imports on GDP growth was also found to be positive and significant both in long run and in short run. The impact of FDI is found positive and significant both in the long run and in the short run. The impact of migration of population to agglomeration cities have huge impact on growth were observed. The impact of unemployment was found to be negative on economic growth in short run.