Does military expenditure hinder economic growth? Evidence from Greece and Turkey

The relationship between economic growth and military expenditure has been extensively studied but its findings are inconclusive and contradictory. The primary reasons behind such disparities include the linear and nonlinear behavior of military expenditure on economic growth and the analysis of different techniques. This study examines the effect of military expenditure on economic growth in Greece and Turkey, which have higher military expenditure burden among the NATO1 countries using a modified Barro model. The autoregressive distributive lag bounds testing (ARDL) for cointegration is used to determine the long run effect. A vector error correction model (VECM) has been used to analyze the short run effect between the variables. The military expenditure displays a significant negative effect on economic growth for Turkey for both short and long run. In contrast, there is no significant military expenditure effect on economic growth for Greece.