Nexus between Military Expenditure and Economic Growth in Bangladesh: A Vector Error Correction Model Approach

Abstract

Military expenditure is considered an influential factor in gross domestic product. This study investigates the relationship between military expenditure and gross domestic product in Bangladesh. Time series data, econometric techniques, and some robustness tests are used in this analysis. The results reveal that a 1% increase in military expenditure leads to a 0.74% increase in gross domestic products in the long run. A unidirectional causal relationship is identified, meaning that military expenditure causes economic growth. An external shock on military expenditure to gross domestic product and gross domestic product to itself have a positive effect, whereas an external shock on military expenditure to itself is decreasing, and gross domestic product is reacting to a shock of military expenditure that initially increases and then remains almost steady in the following years. Hence, military expenditures have a positive impact on economic growth in Bangladesh.