Author: Mary Michail, Nicholas Papasyriopoulos
Publisher/Publication: International Advances in Economic Research
Volume/Issue: 18 (3)
DOI/ISBN: 10.1007/s11294-012-9362-3
Abstract: The authors in this paper examine the long-run relationship between the military spending of the two rival countries Greece and Turkey. Using annual data from 1949 to 2008, they apply cointegration (ADF) and unit root (KPSS) tests to analyze the stationarity and equilibrium of the series. The authors find that there is a positive and stable relation between the two countries’s military spending, with a unit elasticity and a constant ratio of 7/10. They also find that the Greek military spending is weakly exogenous, implying that Turkey adjusts its spending in response to Greece’s movements. They discuss the implications of these findings for the regional security and stability. Part of the econometric school of study of the post-1945 Greek-Turkish military expenditure and possible arms racing.