A note on the causal relationship between defence spending and growth in Greece: 1955–93

Abstract

The causal relationship between economic growth and defence spending has attracted considerable attention and has been the subject of many empirical studies. This paper investigates the existence of a causal link between military expenditure and economic growth in the case of Greece for the period 1955–93. By European Union standards, Greece allocates substantial human and material resources to defence. At the same time, Greece is the poorest European Union member facing chronic economic problems. Using the concept of Granger‐causality, the findings reported herein suggest that neither variable Granger‐causes the other disclosing thereof the absence of any causal ordering between them.

Key Words:

• Granger causality
• Unit roots
• Structural breaks
• Greek military spending
• Economic growth

Notes

Corresponding author. Department of Business Administration, School of Business and Economics, TEI of Larissa, 41110 Larissa, Greece. Tel.: (++3041) 611061/72 ext. 224, Facsimile: (+ [phone] and 610803, E‐mail: [email protected].