Interdependence between US and European military spending: a panel cointegration analysis (1988-2013)

ABSTRACT

The aim of this article is to study the interdependence of military spending between US and a panel of European countries in the period 1988–2013. The empirical estimation is based on a: (1) unit root tests and a cointegration analysis and (2) fully modified ordinary least squares and dynamic ordinary least squares estimations. General results highlight that military spending of European countries is: (1) positively associated with US military spending and (2) negatively associated with average military spending of other European countries.

KEYWORDS:

• Military spending
• interdependence
• panel cointegration
• fully modified OLS
• dynamic OLS

JEL CLASSIFICATION:

• F42
• H56
• H60