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Article
Military spending and budget deficits: the impact of US military spending on public debt in Europe (1988–2013)
Defence and Peace Economics (2016)
  • Raul Caruso
  • Marco di Domizio
Abstract
The aim of this paper is to study the relationship between military spending and sovereign debt in a panel of 13 European countries. In particular, under the assumption of the interdependence of military spending between US and European countries, we analyse whether US military spending affected European sovereign debt in the period 1988–2013. The empirical estimation is based on different steps: (i) a unit root test; (ii) an Arellano–Bond panel estimation and a linear fixed effect model; and (iii) a FMOLS estimation to highlight the long run relationship between debt and relevant variables. General results highlight that debt burden of European countries is: (1) positively associated with US military burden and (2) negatively associated with average military burden of other European countries.
Keywords
  • Military spending,
  • Public debt,
  • Interdependence,
  • Arellano Bond,
  • Fixed effect,
  • Panel cointegration,
  • Fully modified OLS
Publication Date
Fall September 28, 2016
Citation Information
Raul Caruso and Marco di Domizio. "Military spending and budget deficits: the impact of US military spending on public debt in Europe (1988–2013)" Defence and Peace Economics (2016)
Available at: http://works.bepress.com/raul_caruso/68/