Peter C. Frederiksen

Defense Expenditures, External Public Debt and Growth in Developing Countries

This study reexamines the relationship between growth and defense spending in developing countries. It differs from previous studies as it recognizes differences in the borrowing capacity of each country. We hypothesize that a negative relationship will exist between defense and economic growth in countries which are financially resource constrained, and a positive relationship will exist in countries which are relatively resource unconstrained. A factor and discriminate analysis are used to group countries. The variables chosen for the factor analysis depict a countrys external debt, structural condition, growth, and balance of payments position. Regression equations were estimated for the total sample and each group, with the growth in Gross Domestic Product as the dependent variable. The results confirm the hypothesized positive relationship between defense and growth in the unconstrained group, but was not confirmed for the constrained group. The results suggest the importance of variables such as foreign ex change, net inflows of capital, external debt, and the growth of the public sector in general, on economic growth.

Defense Expenditures and Economic Growth in Developing Countries

Abstract : Studies of the effect that defense spending has had on economic growth in less-developed countries have produced rather mixed results. We contend that this is because these studies have failed to take into account the relative financial constraints faced by individual countries. In an extension of the seminal work by Emile Benoit on defense spending and its effect on economic growth, I we hypothesize that relatively poor countries tend to cut back high-growth development expenditures in favor of maintaining defense programs, while relatively rich countries are much less likely to abandon development expenditures given a constant level of defense preparedness. Thus, we should expect a negative relationship between defense and growth in the poorer countries, but a positive relationship in the richer countries. In this article, we examine the relevant literature, and develop a model of defense and economic growth that explicitly incorporates resource constraints. The results of the cluster analysis that was used to group the sample of countries into a richer and poorer group are presented. Finally, the results of the within-group regressions are presented.

Defense spending and economic growth An alternative approach to the causality issue

Abstract This paper re-examines the defense-growth causality issue. Using a 21-country sample and Granger causality methods developed by Hsiao, we find a feedback relationship existx for most countries. This implies that neither growth nor defense can be considered exogenous — a result suspected by Joerding in earlier work — but masked by his choice of an arbitrary lag structure.

The regional impact of infrastructure investment in Mexico

Looney R. and Frederiksen P. (1981) The regional impact of infrastructure investment in Mexico, Reg. Studies 15, 285–296. Using multiple regression analysis, production functions are estimated for Mexico to examine whether infrastructures impact on GDP differs depending on the type of investment (economic or social overhead capital) or the type of recipient region (intermediate or lagging). This possibility has been suggested by Hansen. The states were grouped by means of cluster analysis. The results tend to confirm the Hansen thesis: economic overhead capital has had its greatest impact on GDP in intermediate regions while social overhead capital has had its greatest impact in lagging regions. A test for causality indicates that investment precedes income growth. Several policy recommendations are offered on the basis of these results.

Economic Determinants Of Latin American Defense Expenditures

This article examines the economic determinants of military spending levels in developing countries through a time-series analysis of 10 Latin American countries. The paper integrates a number of main themes in the defense economics literature. The results indicate that a large proportion of the observed variability in military budgets can be explained by one of four alternative models that include either economic variables (gross domestic product and either government revenues or government expenditures) or military budget levels lagged one year, or both. A major conclusion is that it is difficult to predict which of the four models is most appropriate for each country; a priori knowledge of a states oil exports, regime type, indigenous weapons production, or relative resource constraints is of little help. Since no common model was found, forecasts that use economic variables should be done on a case-by-case approach, also considering the timing of fiscal impacts.

Profiles of current Latin American arms producers

In a recent article, Stephanie Neuman examines several critical factors that separate developing countries into arms producers and arms nonproducers. She ranks countries according to a weighted index of military production capability (derived from length of production, production capacity, and technical capabilities) and also according to the following seven socioeconomic indicators: population, land size, size of military, gross national product (GNP), GNP per capita, number of professional and technical workers, and number of industrial workers. She computes correlation coefficients (Kendalls tau) by region (Latin America, South Asia, and the Far East) and for twenty-six arms producers worldwide.

The Effect of Declining Military Influence on Defense Budgets in Latin America

While military governments have often been a tradition in many Latin American countries, a relatively small and stable number of national resources are traditionally allocated to national defense. Recent studies on the determinants of defense spending in this region have employed data only through the mid-1980s. Since then, sweeping economic and political changes have occurred in the region. This article examines the factors influencing Latin American defense allocations for fifteen countries in the 1980s to the mid-1990s. We posit a long-term relationship between defense and other variables (such as GNP), and employ a technique to separate year to year movements in the defense burden into components associated with (a) short-run factors and (b) the correction of the deviation from the long-run pattern. Factors such as military influence and changes in regional defense expenditures are examined. The results suggest that for most of the 15 countries, a high proportion of the defense burden is explained by relatively few variables. For six countries, no long-run trend was identified and defense expenditures are determined by short-run shocks. For the other nine countries, equilibrating corrections are made to the defense budget in response to short-run shocks.

Consequences of Military and Civilian Rule in Argentina An Analysis of Central Government Budgetary Trade-Offs, 1961-1982

This article examines whether budget allocations to nondefense programs in Argentina between 1961 and 1982 are dependent on the share to defense, the political regime, or both. Multiple regression equations are estimated and include the defense share, two control variables, and political dummies to test for changes in the intercept and slope of the equation as the regimes change. Regimes are differentiated between (a) the first civilian and first military (b) the Peronists, and (c) the second military.

Fiscal policy in Mexico: The FitzGerald thesis reexamined

Abstract Interest continues in the Mexican governments finance and expenditure policy due to the severity and length of fiscal crises. According to FitzGerald, Mexican deficits were financed through increased savings crowding out consumption but not private investment. Using official IMF data this paper attempts to verify the FitzGerald thesis. By and large our results suggest the Mexican economy is best depicted along Keynesian lines and not FitzGeralds Kaleckian interpretation. This conclusion is further substantiated by the prolonged nature of the countrys current economic crisis associated with record high central government deficits and subdued levels of private sector investment. If his thesis were valid for an earlier time (1951–1965), many of these relationships disappeared between 1965 and 1981.

The feasibility of alternative IMF-type stabilization programs in Mexico, 1983-1987

Abstract In November 1982, Mexico announced an agreement with the International Monetary Fund (IMF) on a program to ease the countrys large foreign debt. Mexico may recieve nearly