Asymmetric Effect of Military Expenditures on Economic Growth in Pakistan: A Nonlinear-ARDL Approach

Li Lanrui; Zia Ur Rahman; Shoukat Iqbal Khattak; Mohammad  Maruf Hassan

doi:10.5755/j01.ee.33.3.28982

Authors

Li Lanrui Researh School for Southeast Asian Studies, Xiamen University, China
Zia Ur Rahman Research School for Southeast Asian Studies, Xiamen University, China
Shoukat Iqbal Khattak School of Business Administration, Jimei University, China
Mohammad Maruf Hassan School of international studies, Sichuan University, China

DOI:

https://doi.org/10.5755/j01.ee.33.3.28982

Keywords:

Military spending, Capital, Economic growth, NARDL model, Pakistan

Abstract

The nexus between military expenditure and economic growth has been analyzed using different methods and techniques in the economic growth literature, but most previous findings are indecisive, i.e., non-significant, positive, or negative. The primary purpose of this article was to explain the military expenditure-economic growth nexus in Pakistan by capturing the asymmetrical effects of military expenditures on economic growth using the non-linear autoregressive distribution lag-NARDL technique. Data were analyzed from 1972-2018. The results indicated that a decrease in military spending (adverse shocks) enhanced economic growth in the long term. An increase in military spending (positive shocks) had an insignificant effect on economic growth in Pakistan, suggesting that a focus on cost reduction in military expenditure may benefit economic growth. More so, the Wald test validated the asymmetries both in the long- and short term. Capital formation and labor force, as a control variable, positively affected economic growth in the long run. Based on these findings, the paper offers some critical suggestions for policymakers.

Author Biographies

Li Lanrui, Researh School for Southeast Asian Studies, Xiamen University, China

Li Lanrui is currently doing PhD at the School of International Relations at Xiamen University (China).

Zia Ur Rahman, Research School for Southeast Asian Studies, Xiamen University, China

Zia Ur Rahman received PhD in World Economics from the Research School for Southeast Asian studies. He has a Master’s degree in Wolrd Economics (2017) from Beijing Normal University China. Zia has a more than dozen publications in the world’s top peer-reviewed (SSCI/SCI) journals.

Shoukat Iqbal Khattak, School of Business Administration, Jimei University, China

Shoukat Iqbal Khattak is a Professor at the School of Business Administration at Jimei University (China). He published many papers in various top SSCI/SCI journals.

Mohammad Maruf Hassan, School of international studies, Sichuan University, China

Mohammad Maruf Hasan, PhD, is currently an Assistant Professor at the School of International Studies at Sichuan University (China). He received his PhD in Economics (2021) from Xiamen University (China) and M.Sc. degree in Economics (2016) from Northeast Normal University (China). He is a researcher and a trainer with diverse experience with national and international organizations. He has published research articles in Singapore Economic Review, Energy Strategy Reviews, Energy Reports, and other top journals in economics.