Military Economy and Economic Growth: Bidirectional Effects in Transition Economies of Eurasia

Abstract

Recently, the worrisome rise of military economy in Eurasian transition economies has raised concerns on what is behind this trend and what are its economic consequences. Based on the evidence from 26 Eurasian countries selected into two subgroups “Russia+10” and “15 Central and Eastern European” (CEE) countries over the period from 1991 to 2019, this article focuses on the military economy overview in this region and demonstrates the result of panel data estimations of bidirectional relation between military economy indicators and economic growth. The study shows that in “Russia+10,” military expenditures to GDP and to government spending have a positive effect on growth, and economic growth has a negative influence on these two indicators. Moreover, armed forces to labor forces have a positive bidirectional relation with economic growth in “Russia+10.” For the samples of “15 CEE” and all Eurasian countries, there are not always statistically significant results to offer clear conclusion on bidirectional effects between military expenditures to GDP and to budget expenses and economic growth. Armed forces to labor forces show a positive effect on growth in Eurasia and “15 CEE” countries.