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Abstract
Fiji's total debt stands at 65% of GDP. Domestic debt constitutes 55% of GDP. The goal of this paper is to investigate whether military expenditure has contributed to Fiji's exploding debt levels over the period 1970 to 2005. Our empirical analysis, conducted within a cointegration and vector error‐correction framework, suggests that, in the long‐run, military expenditure has had a statistically significant positive impact on both external debt and domestic debt, while income has had a statistically significant positive impact on domestic debt and a statistically significant negative impact on external debt. We explain the reasons behind this finding and draw some policy implications.
*Helpful comments on earlier versions of this paper from two anonymous referees of this journal, and Russell Smyth (Monash University), Jitendra Singh (Reserve Bank of Fiji) and Isikeli Voceduadua (Ministry of Finance, Fiji) are acknowledged. The usual disclaimer applies.
Notes
*Helpful comments on earlier versions of this paper from two anonymous referees of this journal, and Russell Smyth (Monash University), Jitendra Singh (Reserve Bank of Fiji) and Isikeli Voceduadua (Ministry of Finance, Fiji) are acknowledged. The usual disclaimer applies.
1While the ARDL estimator is valid regardless of whether or not the data series is integrated of order one, the rest of the estimators are not. Given this, we used the augmented Dickey and Fuller (Citation1979) test and examined the null hypothesis of a unit root. We found that all variables were integrated of order one. The complete results are available from the author upon request.
2See related discussion in Narayan and Narayan (Citation2003, Citation2004).