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Net spills among NATO allies: Theory and empirical evidence from dynamic quantile connectedness

Palaios Panagiotis, Triantafillou Anna, Zombanakis George

Security and Defence Quarterly

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2023

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Vol. 44, No. 4

21--37

EN

The paper draws on the economic theory of alliances to stress the importance of considering both benefits and costs arising from the interaction between member states of a military alliance in terms of defence expenditure on equipment. We expand the theory of alliances to incorporate the spills that stem from the obligations of each ally by introducing the notion of spill-outs and net spills, the latter measured as the difference between spill-in and spill-out effects. To assess the net spills contribution of each of the members to the alliance, we test for empirical evidence of net spills among a group of North Atlantic Treaty Organization (NATO) allies, applying time-varying Dynamic Quantile Connectedness analysis. The results that stem from our model considering the cost of spill-outs suggest that there are strong incentives among the allies for free-riding behaviour. In line with our theoretical model, our empirical analysis shows that it is only during crisis period that NATO member-states contribute actively to the alliance, something that has become increasingly clear since the recent Russian invasion of Ukraine.

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Introduction to Special Issue on Navigating NATO dynamics: Addressing various challenges in the international security environment

Chapman Bert, Gryz Jarosław, Zombanakis George

Security and Defence Quarterly

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2023

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Vol. 44, No. 4

1--4

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

Bardakas Ioanna, Doulos Dimitris, Zombanakis George

Security and Defence Quarterly

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2023

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Vol. 41, No. 1

1--14

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.

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Assessing the cost of friction between NATO Allies

Katsaitis Oysseus, Zombanakis George

Security and Defence Quarterly

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2021

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Vol. 36, No. 4

25--48

EN

This paper proposes a method for assessing the cost of friction between North Atlantic Treaty Organisation (NATO) allies and highlights internal threats. This is applied to the Greek–Turkish conflict within the NATO context and concerns the functioning of defence expenditure in Greece, modified in such a way as to focus on the causes of friction between these allies. The analysis concentrates mainly on the issue of internal threats to the long-run equilibrium of NATO. The ARDL methodology used modifies the typical error correction model by introducing a mechanism that accelerates the process that leads back to the long-run equilibrium. Along with assessing the cost to an ally in relation to an internal threat, the method proposed allows the time required for the long-run equilibrium of NATO to be restored. The paper concludes that dynamic incidents of friction between allies expressed as an internal threat disturb NATO’s static equilibrium, destabilise an individual ally’s defence policy and contribute to cost being incurred.