MILEX Panel

While some people perceive military spending as a guarantee of security and peace, others see it as a foolish endeavor that could spark arms races or armed conflict. This study adopts a pooled mean group approach to investigate the nexus between arms imports, military expenditure, and per capita GDP for a balanced panel of twenty-five of the top arms importers in the world from 2000 to 2021. We find that armed imports negatively impact GDP per capita, but military spending is beneficial over the long and short term. We also used the Dumitrescu Hurlin Granger causality test, which revealed a unidirectional causation between per capita GDP and military expenditure, and a unidirectional causal relationship from military spending to arms imports. The findings of this paper support the Keynesian and Wagnerian hypothesis that with an increase in state responsibilities, government spending and economic growth go hand in hand.