The Relationship Between Defense Expenditures and Economic Growth: Rolling-Window Causality Test

Abstract

Defense expenditures have an essential place in the growth of countries. Defense expenditures and economic growth are frequently linked in the literature. The relationship between these variables may alter according to time and country-specific characteristics. This study examines the causality relationship between defense expenditures and economic growth with the rolling-window causality. For all panels, the study found bidirectional causality only in China and unidirectional causality in S. Korea and the UK. On the other hand, the rolling-window causality test detected bidirectional causality between the variables in all countries except the USA. Economic growth and defense expenditures have a unidirectional causality in the USA.