Military spending and budget deficits: the impact of US military spending on public debt in Europe (1988-2013)

The aim of this paper is to study the relationship between military spending and sovereign debt in a panel of 13 European countries. In particular, under the assumption of the interdependence of military spending between US and European countries, we analyse whether US military spending affected Eur...

Full description

Saved in:
Bibliographic Details
Published inDefence and peace economics Vol. 28; no. 5; pp. 534 - 549
Main Authors Caruso, Raul, Di Domizio, Marco
Format Journal Article
LanguageEnglish
Published Routledge 03.09.2017
Subjects
Arellano Bond
Fixed effect
Fully modified OLS
Interdependence
Military spending
Panel cointegration
Public debt
Online AccessGet full text

Cover

More Information
Summary:The aim of this paper is to study the relationship between military spending and sovereign debt in a panel of 13 European countries. In particular, under the assumption of the interdependence of military spending between US and European countries, we analyse whether US military spending affected European sovereign debt in the period 1988-2013. The empirical estimation is based on different steps: (i) a unit root test; (ii) an Arellano-Bond panel estimation and a linear fixed effect model; and (iii) a FMOLS estimation to highlight the long run relationship between debt and relevant variables. General results highlight that debt burden of European countries is: (1) positively associated with US military burden and (2) negatively associated with average military burden of other European countries.
ISSN:1024-2694
1476-8267
DOI:10.1080/10242694.2016.1228259