The Keynesian IS-MR Model and Military Spending

Abstract

The issue of guns or butter is one of the most fundamental economic questions, yet there is no consensus on a theoretical framework for examining it. Over the last decade, a version of a simple Keynesian macroeconomic model has been applied a number of times to examining the link between defence spending and economic growth in a range of countries. There are reasons for doubting the soundness of this model as a basis for empirical work.

Keywords:

• Military spending
• Output
• Keynesian model
• Multipliers

JEL Codes:

• C22
• E12
• E62
• H56

Acknowledgement

The author would like to thank an anonymous referee for very helpful comments. The usual disclaimer applies.