Asymmetric Effect of Military Expenditures on Economic Growth in Pakistan: A Nonlinear-ARDL Approach

• Published in: Inžinerinė ekonomika 2022-06, Vol.33 (3), p.316-325
• Main Authors: Lanrui, Li, Ur Rahman, Zia, Iqbal Khattak, Shoukat, Maruf Hassan, Mohammad
• Format: Article
• Language: English
• Subjects: Capital formation; Cost reduction; Defense spending; Economic growth; Expenditures; Labor force; Policy making
• ISSN: 1392-2785; 2029-5839
• DOI: 10.5755/j01.ee.33.3.28982

The nexus between military expenditure and economic growth has been analyzed using different methods and techniques in the economic growth literature, but most previous findings are indecisive, i.e., non-significant, positive, or negative. The primary purpose of this article was to explain the military expenditure-economic growth nexus in Pakistan by capturing the asymmetrical effects of military expenditures on economic growth using the non-linear autoregressive distribution lag-NARDL technique. Data were analyzed from 1972-2018. The results indicated that a decrease in military spending (adverse shocks) enhanced economic growth in the long term. An increase in military spending (positive shocks) had an insignificant effect on economic growth in Pakistan, suggesting that a focus on cost reduction in military expenditure may benefit economic growth. More so, the Wald test validated the asymmetries both in the long- and short term. Capital formation and labor force, as a control variable, positively affected economic growth in the long run. Based on these findings, the paper offers some critical suggestions for policymakers.