A Unified Framework of Economic Growth, Defense Expenditure and External Debts

Abstract

The issue of whether military expenditure interacts with economics forces to facilitate economic growth remains a reoccurrence debate since the Benoit Hypothesis (1978). This paper aims to show how Nigeria’s economic growth, military spending and external debt interact under a unified framework. Because the considered variables are non-stationary and the modelled relationship cointegrated, the interconnectedness is reported based on the VECM. The findings show economic growth leads to a significant increase (decrease) in the current value of defense spending (debt). More so, increased debt creates pressure that may ignite the next period growth. The findings identify new challenges for policymakers to put growth pursuit and debts profile into consideration when developing the defense budget.

Keywords

• benoit hypothesis
• economic growth
• defense spending
• external debt