The Role of Institutional Quality in Military Spending and Unemployment Nexus in Nigeria

Abstract This paper adopts the Autoregressive Distributed Lag (ARDL) estimation method to investigate the moderating role of institutional quality in military spending and the unemployment rate nexus in Nigeria for the period from 1984 to 2019. It also tests the direction of causality between military spending and unemployment using the Toda-Yamamoto Granger non-causality method. The causality results show that the direction of causality depends on the measure of military spending used. The main results indicate that military spending only reduces unemployment in the short run and worsens unemployment in the long run. The results further show that institutional quality does not play any significant moderating role in the relationship between military spending and unemployment. Based on our findings, we advocate that the government should allocate its expenditure properly, especially to the most productive sectors of the economy instead of increasing military spending that has no long-run effect on unemployment. Besides, the government needs to strengthen the institutional apparatuses in the country.