DOES MILITARY KEYNESIANISM HOLD FOR ASIAN COUNTRIES? PANEL COINTEGRATION AND GRANGER CAUSALITY EVIDENCE.

This paper inquires the existence of military Keynesianism for Asian region by testing cointegration and causality between defence expenditure and economic growth for time period 1990-2010. Panel unit root tests affirm the stationarity and panel cointegration technique by Pedroni (1999) discovers long run relationship between defence expenditure and economic growth. Panel Granger causality test shows that defence expenditure does not Granger cause economic growth, but reverse causality holds. Military Keynesianism does not hold in this case. The possible reason is pre-dominant expenditure on basic services in these un-developed countries and lack of locally production of advanced military goods. [ABSTRACT FROM AUTHOR]