The Study on the Effect of Military Expenditure on Economic Growth in Korea

Studying the effects of military expenditure on economic growth has been an important issue globally over the last two decades. In this respect, the main objective of this study is to investigate the impact of military expenditure on economic growth in Korea over the period of 1988-2012. Therefore, the study examines the empirical question of whether military expenditure enhances or hinders economic growth. To do this task, important econometric methods are fulfilled to test the model adequately, such as unit root, co-integration and VECM techniques. The empirical results show that export has a significant positive impact on economic growth as expected. However, it presents that there is a significant negative impact of military expenditure on economic growth, which implies that the military burden hinders economic growth. Overall, the implication of this study is that military expenditure is a vital element of national security, but policy makers should consider the economic, social and other elements of investing in national security as well.