The Relation between Military Expenditure and Economic Growth: Evidence from Turkey

After the Second World War, especially in the Cold War era, military expenditures increased worldwide and it has reached its highest levels in the late 1980s. The countries have revised their national security policies due to the increasing terrorist attacks in the following period. Turkey is located in the Middle East is experiencing an intense battle and hence the existence of a strong army has a vital importance for Turkey. The share of military spending in Turkey’s economy is very high because of long-standing terrorist incidents and being an important force in the region. The relationship between economic growth and defense spending is analyzed by using annual data for the 1968-2017 periods in Turkey. The short- and long-term causality relationships between related variables are examined by means of using the frequency domain causality test suggested by Breitung and Candelon (2006). We find evidence in favor of the causal link running from military expenditures to economic growth. The impulse-responses analysis results suggest that the responses of the GDP to an unexpected military spending are negative and statistically significant in the long-term