DEFENSE EXPENDITURE AND ECONOMIC GROWTH IN SOUTH ASIAN COUNTRIES: AN ECONOMETRIC ANALYSIS

This research study focused on comprehensive and objective discussion vis-a-vis critical analyses pertaining to the co-integration and causal relationship between defense expenditure and economic growth of selected South Asian countries namely Bangladesh, India, Pakistan, Sri Lanka and Nepal. Further this work examined the factors which determine the budgetary allocation of deference expenditure in south Asian countries in a panel framework, given their socioeconomic, political and strategic circumstances. The time series data on GDP, defense expenditure, inflation rate, size of the army, consumption expenditure, population size and inflation rate from 1973 to 2018 were used and econometric techniques like Random Effects model (REM), Fixed Effects Model (FEM) and Generalized Method of Moments (GMM) were applied. Results of FEM, REM and GMM showed the relationship among defense expenditure, economic growth, army size, inflation rate, per capita income, consumption expenditures in south Asian countries at various degrees and magnitudes; and on the other hand highlight that population size, size of the army, lagged military expenditure and economic growth are most influencing factors which determine the size of defense expenditures.