Do military expenditures converge in NATO countries? Linear and nonlinear unit root test evidence

Abstract

It is a public service that states defend their countries against internal and external threats. Military expenditures are made to this end. Although military expenditures contribute to economy, a safe environment is important for economic development. Military expenditures hold an important place within overall expenditures of countries. Although military expenditures and their share within GDP differ, they hold an important place within total public expenditures of countries. However, there aren’t many studies on military expenditures in literature. We tested the convergence hypothesis of military expenditures for NATO countries covering a period from 1953 to 2014 by using linear and nonlinear unit root tests. According to the findings, the conclusion is that the military expenditures of Germany, Greece, Portugal, the UK and Luxembourg converge to the NATO mean whereas the convergence hypothesis does not hold true for other NATO countries.

Keywords

• military expenditures
• convergence
• NATO countries
• linearity tests
• linear and nonlinear unit root tests