Defence expenditure and public debt in Greece: A non-linear relationship

• Autorzy: Bardakas Ioanna , Doulos Dimitris , Zombanakis George

Identyfikatory

DOI

10.35467/sdq/155960

• Języki publikacji: EN

Abstrakty

EN

The aim of this paper is to consider and evaluate the widely–used argument attributing the growth of the public debt of Greece in recent decades to the country’s defence expenditure. We employ a two-equation model that focuses on the determinants of the military debt and how this has affected the public debt. The source of our military debt data is the Hellenic General Accounting Office, an option taken to cope with confidentiality issues. Finally, we insist on focusing on the expenditure on defence equipment imports rather than the total defence spending that the literature mostly covers, for reasons extensively analysed. Our methodology firstly assumes a linear relationship between military debt and public debt. We solve the system using 3SLS to obtain consistent and efficient estimates to derive interesting policy implications. The employment of a non-linear quadratic form not previously adopted proves to be superior in terms of performance and reveals the complexity of the above relationship. These point to the conclusion that the defence equipment purchases made since the beginning of the eighties have not had a decisive impact on the public debt of Greece. The defence equipment purchases made since the beginning of the eighties represent a very low percentage of the total public debt of Greece. Moreover, these are considered to be an investment activity rather than consumer spending, which has been acknowledged in the literature as the primary cause of Greece’s high indebtedness and the ensuing economic crisis.

Słowa kluczowe

EN

defence expenditure; public debt; 3SLS

• Wydawca: Akademia Sztuki Wojennej
• Czasopismo: Security and Defence Quarterly
• Rocznik: 2023
• Tom: Vol. 41, No. 1
• Strony: 1--14
• Opis fizyczny: Bibliogr. 40 poz., rys., tab.

Twórcy

autor

Bardakas Ioanna

• Research Department, Bank of Greece, Greece, 21 Panepistimiou street, 102 50 Athens, Greece

• https://orcid.org/0000-0002-7394-0373

autor

Doulos Dimitris

• Department of Accounting, Finance and Economics, The American College of Greece, 6 Gravias Street GR-153 42 Aghia Paraskevi, Greece

• https://orcid.org/0000-0002-7189-9565

autor

Zombanakis George

• Department of Accounting, Finance and Economics, The American College of Greece, 6 Gravias Street GR-153 42 Aghia Paraskevi, Greece

• https://orcid.org/0000-0003-3137-2029

Bibliografia

• 1. Alami R. (2002) ‘Military Debt: Perspectives from the Experience of Arab Countries’, Defence and Peace Economics, 13(1), pp. 13–20. doi: 10.1080/10242690210964.
• 2. Alexander W.R.J. (2013) ‘The defence-debt nexus: Evidence from the high-income members of NATO’, Defence and Peace Economics, 24(2), pp. 133–145. doi: 10.1080/10242694.2012.673839.
• 3. Alogoskoufis G. (2021) ‘Greece before and after the euro: Macroeconomics, politics and the quest for reforms’, in Alogoskoufis G. and Featherstone K. (eds.) Greece and the Euro: From crisis to recovery. Medford: The Fletcher School, Tufts University, pp. 29–73.
• 4. Andreou A. and Zombanakis G. (2006) ‘The arms race between Greece and Turkey: Commenting on a major unresolved issue’, Peace Economics, Peace Science and Public Policy, 12(1), pp. 1–18. doi: 10.2202/1554-8597.1092.
• 5. Andriopoulou E., Kanavitsa E. and Tsakloglou P. (2021) ‘Income inequality and re-distribution: From crisis to recovery’, in Alogoskoufis G. and Featherstone K (eds.) Greece and the Euro: From crisis to recovery. Medford: The Fletcher School, Tufts University, pp. 205–232.
• 6. Azam M. and Yi F. (2017) ‘Does military expenditure increase external debt? Evidence from Asia’, Defence and Peace Economics, 28(5), pp. 550–567. doi: 10.1080/10242694.2015.1072371.
• 7. Bai J. and Perron P. (2003) ‘Critical values for multiple structural change tests’, Econometrics Journal, 6, pp. 72–78. doi: 10.1111/1368-423X.00102.
• 8. Bound J.D., Jaeger A. and Baker R.M. (1995) ‘Problems with instrumental variables estimation when the correlation between the instruments and the endogeneous explanatory variable is weak’, Journal of the American Statistical Association, 90(430), pp. 443–450. doi: 10.1080/01621459.1995.10476536.
• 9. Bragoudakis Z. and Zombanakis G.A. (2017) ‘Earning a peace dividend in a crisis environment: The Greek case’, Peace Economics, Peace Science, and Public Policy, 23(3), pp. 1–15. doi: 10.1515/peps-2016-0040.
• 10. Brzoska M. (1983) ‘The military related external debt of third world countries’, Journal of Peace Research, 20(3), pp. 271–277. doi: 10.1177/002234338302000308.
• 11. Dickey D.A. and Fuller W.A. (1979) ‘Distribution of the estimators for autoregressive time series with a unit root’, Journal of the American Statistical Association, 74, pp. 427–431. doi: 10.1080/01621459.1979.10482531.
• 12. Dimitraki O. and Kartsaklas A. (2018) ‘Public debt, deficits and defence spending: The case of Greece’, Defence and Peace Economics, 29(6), pp. 712–727. doi: 10.1080/10242694.2018.1289497.
• 13. Dunne J.P., Smith R.P. and Willenbockel D. (2005) ‘Models of military expenditure and growth: A critical review’, Defence and Peace Economics, 16(6), pp. 449–461. doi: 10.1080/10242690500167791.
• 14. Dunne P.S., Perlo-Freeman S. and Soydan A. (2004) ‘Military expenditure and debt in South America’, Defence and Peace Economics, 15(2), pp. 173–187. doi: 10.1080/1024269032000110540.
• 15. Esener S. and İpek E. (2015) ‘Expanding effects of military expenditures on external debt in developing countries’, Journal of Business Economics and Finance, 4(4), pp. 617–617. doi: 10.17261/Pressacademia.2015414532.
• 16. European Union (2013) Regulation (EU) no 549/2013 of the European Parliament and of the Council of 21 May 2013 on the European system of national and regional accounts in the European Union. Available at: https://eur-lex.europa.eu/legal-content/en/ALL/?uri=CELEX%3A32013R0549 (Accessed: 1 July 2022).
• 17. Georgantopoulos A. and Tsamis A. (2011) ‘The interrelationship between military expenditure and external debt: patterns of causation in northern Africa countries’, Journal of Economics and Behavioral Studies, 3(4), pp. 264–273. doi: 10.22610/jebs.v3i4.279.
• 18. Giotopoulos I., Pavlou G., Danchev S. and Tsakanikas A. (2015) ‘Public procurement reforms in Greece: The impact of improved transparency on government expenditures’, Journal of Public Procurement, 15(4), pp. 458–475. doi: 10.1108/JOPP-15-04-2015-B003.
• 19. Herrera R. and Gentilucci E. (2013) ‘Military spending, technical progress, and economic growth: A critical overview on mainstream defence economics’, Journal of Innovation Economics and Management, 12(2), pp. 13–35. doi: 10.3917/jie.012.0013.
• 20. Karagianni S. and Pempetzoglou M. (2019) ‘A linear and non-linear causality analysis between military expenditures and external debt in NATO member countries’, European Journal of Economics and Business Studies, 5(1), pp. 37–45. doi: 10.26417/ejes.v5i1.pp.37-45.
• 21. Karagol E. (2006) ‘The relationship between external debt, defence expenditures and GNP revisited: The case of Turkey’, Defence and Peace Economics, 17(1), pp. 47–57. doi: 10.1080/10242690500369199.
• 22. Katsaitis O., Kondylis K. and Zombanakis G. (2019) ‘Concerns on the issue of defence expenditure in the post-crisis Greece’, Security and Defence Quarterly, 24(2), pp. 177–201. doi: 10.35467/sdq/103408.
• 23. Kennedy P. (1987) The rise and fall of great powers: Economic change and military conflict from 1500 to 2000. New York, NY: Random House.
• 24. Khan L., Imtiaz A. and Sundus W. (2021) ‘The impact of military expenditure on external debt: The case of 35 arms importing countries’, Defence and Peace Economics, 32(5), pp. 588–599. doi: 10.1080/10242694.2020.1723239.
• 25. Looney R.E. and Fredericksen P.C. (1986) ‘Defence expenditures, external public debt and growth in developing countries’, Journal of Peace Research, 23(4), pp. 329–337. doi: 10.1177/002234338602300403.
• 26. Narayan P.K. and Smyth R. (2007) ‘The military expenditure-external debt nexus: New evidence from a panel of Middle Eastern countries’, Working Paper 17-07. Melbourne: Department of Economics, Monash University.
• 27. Nikiforos M.D., Papadimitriou B. and Zezza G. (2015) ‘The Greek public debt problem’, Nova Economia, 25, pp. 777–802. Available at: https://www.redalyc.org/articulo.oa?id=400449413003 (Accessed: 1 March 2022).
• 28. Nikolaidou E. (2016) ‘The role of military expenditure and arms imports in the Greek debt crisis’, Economics of Peace and Security Journal, 11(1), pp. 18–27. doi: 10.15355/epsj.11.1.18.
• 29. Paleologou S.M. (2013) ‘A dynamic panel data model for analyzing the relationship between military expenditure and government debt in the EU’, Defence and Peace Economics, 24(5), pp. 419–428. doi: 10.1080/10242694.2012.717204.
• 30. Paparas D., Richter C. and Paparas A. (2016) ‘Military spending and economic growth in Greece and the arms race between Greece and Turkey’, Journal of Economics Library, 3(1), pp. 38–56.
• 31. Pedroni P. (2004) ‘Panel Cointegration: Asymptotic and Finite Sample Properties of Pooled Time Series Tests with an Application to PPP Hypothesis: New Results’ , Econometric Theory 20(3): 597–627.
• 32. Perron P. (1989) ‘The great crash, the oil price shock, and the unit root hypothesis’, Econometrica, 57, pp. 1361–1401.
• 33. Sezgin S. (2004) ‘An empirical note on external debt and defence expenditures in Turkey’, Defence and Peace Economics, 15(2), pp. 199–203. doi: 10.1080/1024269032000110568.
• 34. Shahbaz M., Leitão N.C., Uddin G.S., Arouri M. and Teulon F. (2013) ‘Should Portuguese economy invest in defence spending? A revisit’, Economic Modelling, 35, pp. 805–815. doi: 10.1016/j.econmod.2013.08.038.
• 35. Skaperdas S. (2015) ‘Myths and Self-Deceptions about the Greek Debt Crisis,’ Working Papers 141511, Irvine, CA: University of California-Irvine, Department of Economics.
• 36. Smith R.P. (1980) ‘The demand for military expenditure’, The Economic Journal, 90(360), pp. 811–820. doi: 10.2307/2231744.
• 37. Smith R.P. (1989) ‘Models of military expenditures’, Journal of Applied Econometrics, 4(4), pp. 345–359. doi: 10.1002/jae.3950040404.
• 38. Torres J.L. (2020) ‘The production of national defense and the macroeconomy’, PLoS One, 15(10), e0240299. doi: 10.1371/journal.pone.0240299.
• 39. Wolde-Rufael Y. (2009) ‘The defence spending–External debt nexus in Ethiopia’, Defence and Peace Economics, 20(5), pp. 423–436. doi: 10.1080/03066150902868171.
• 40. Zellner A. and Theil H. (1962) ‘Three-Stage least squares: simultaneous estimation of simultaneous equations’, Econometrica, 30, pp. 54–78. doi: 10.2307/1911287.

Uwagi

Opracowanie rekordu ze środków MEiN, umowa nr SONP/SP/546092/2022 w ramach programu "Społeczna odpowiedzialność nauki" - moduł: Popularyzacja nauki i promocja sportu (2022-2023).