New evidence from an alternative methodological approach to the defence spending-economic growth causality issue in the case of mainland China

Masih, Abdul M.M. and Masih, Rumi and Hasan, Mohammad S (1997) New evidence from an alternative methodological approach to the defence spending-economic growth causality issue in the case of mainland China. Journal of Economic Studies, 24 (3). pp. 123-140. ISSN 0144-3585. (The full text of this publication is not available from this repository)

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Official URL
http://dx.doi.org/10.1108/01443589710167347

Abstract

Proposes to re-examine empirically the causal relationship between defence spending and economic growth in mainland China. First, using a VAR modelling technique with suitable diagnostics, e.g. Akaike’s FPE statistics and a likelihood ratio test for over- and under-fitting the causal model, the results indicate a positive unidirectional causality flowing from defence spending to economic growth. Second, by evaluating a dynamic vector error-correction model, variance decomposition and impulse response functions, then analyses the direction, duration and strength of Granger-causality between defence spending and economic growth. The results broadly indicate that defence spending and economic growth did share a common trend over the sample period under analysis, but it was the former which stimulated the latter. Moreover, it is defence spending that has a much more perceptible and prolonged effect on economic growth, giving rise to implications that although expenditure on defence may have been politically motivated, over the long-run this spending did play a significant indirect role in enhancing the growth potential of this, for many years, closed-door economy.

Item Type: Article
Uncontrolled keywords: Cointegration, Defence, Growth, Models
Subjects: H Social Sciences
Divisions: Faculties > Social Sciences > Kent Business School > Accounting and Finance
Depositing User: Rebecca Stevenson
Date Deposited: 27 Jan 2010 12:19
Last Modified: 27 Jan 2010 12:19
Resource URI: http://kar.kent.ac.uk/id/eprint/23611 (The current URI for this page, for reference purposes)
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