Journal of the military operations research society of Korea (한국국방경영분석학회지)

Military Operations Research Society of Korea (한국국방경영분석학회)
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A Causality Analysis of Korean Defense Expenditure and Economic Variables

한국의 국방비지출과 경제변수의 인과관계 분석

  • 김종문 ((주)인터맥스코리아/전 한국국방연구원)
  • Published : 2004.06.01
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Abstract

Ever since Benoit's(1973, 1978) study, the relationship between defense spending and economic growth has been the subject of extensive empirical works. While a number of studies have reported that higher defense expenditure stimulate economic growth, many other studies have reported that an increase in military burden may hinder economic growth. To the extent that countries differ substantially in socioeconomic structures, the effects of defense spending cannot be generalized across countries. In this paper, Granger causality tests are performed between Korean defense expenditure and economic growth, consumption, investment, inflation and unemployment rate during the period from 1970 to 2002. The results show that Korean defense expenditure did not affect economic growth and unemployment rate. However, Korean defense expenditure caused consumption and inflation to decrease and investment to increase. On the other hand Korean defense expenditure was not Granger-caused by economic growth, consumption, investment, inflation and unemployment rate. In conclusion, the opportunity cost of Korean defense expenditure seemed to be relatively moderate considering Korean security environment. Even if it was not statistically significant, Korean defense burden at least did not bother economic growth.

Keywords

References

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