Selami Sezgin

MILITARY EXPENDITURE AND ECONOMIC GROWTH IN MIDDLE EASTERN COUNTRIES: A DYNAMIC PANEL DATA ANALYSIS

Defence expenditures have both costs and benefits to the economy. The costs of defence expenditures are mainly emphasized as opportunity costs. On the other hand, defence spending may have growth‐promoting potential benefits: a rise in defence spending may result in a higher aggregate demand, production and employment. This paper examines empirically the effects of military expenditures on economic growth for Middle Eastern countries and Turkey, for the time‐period 1989–1999. The relationship between military expenditure and economic growth is investigated by using cross‐section and dynamic panel estimation techniques. Empirical analysis indicates that military expenditure enhances economic growth in the Middle Eastern countries and Turkey as a whole.

Country survey X: Defence spending in Turkey

This paper provides a country survey of the Turkish defence economy. Turkey is a member of NATO alliance and is strategically located between Europe and Middle East. Moreover, Turkey has a high defence burden and high economic growth. The first part of the survey presents a brief economic background of Turkey, its armed forces, the defence industry, its modernisation and trends in Turkish defence expenditure. The rest of the paper focuses on the relationships between defence spending and economic growth. The effect of defence spending on economic growth is econometrically estimated using a supply side model. Both externality effects and the size effect of defence spending are estimated for Turkey. The study concludes that defence expenditure stimulates economic growth while externalities from the defence sector to the rest of economy are negative for Turkey.

An empirical analysis of turkey's defence‐growth relationships with a multi‐equation model (1956–1994)*

This study analyses defence‐growth relationships in Turkey for the years 1956 and 1994. After a review of the empirical studies on the defence‐growth relationship, the relationship is investigated with a Deger type demand and supply side model using 2SLS and 3SLS simultaneous equation method. The study concludes that Turkeys economic growth is stimulated by its defence sector while defence spending has no significant effect on savings and the balance of trade. The study also concludes that the major determinants of Turkish defence spending are its income level, the conflict with PKK (Kurdish Workers Party) and Greeces defence spending.

The Demand for Turkish Defence Expenditure

Although a number of studies concerning Turkish defence-growth relation have been published in recent years, little attention is given the demand for Turkish defence expenditure. This is an important issue for understanding which variables contribute to the determination of the demand for military expenditure. However, it is difficult to develop a general theory or a standard empirical approach for the determination of the demand military expenditure. This study models and estimates the demand for Turkish defence expenditure for the period 1951-1998 using autoregressive distributed lag approach to cointegration (ARDL) following the methodology outlined in Pesaran and Shin (1999). This procedure can be applied regardless of the stationary properties of the variables in the sample and allows for inferences on long-run estimates, which is not possible under alternative cointegration procedures. The findings suggest that Turkish defence spending is determined by NATOs defence spending, Greeces defence spending and some security considerations.

REGIONAL UNDERDEVELOPMENT AND TERRORISM: THE CASE OF SOUTH EASTERN TURKEY

This article investigates the possible role of the regional underdevelopment of South Eastern Turkey in the ensuing terrorism in the country. The article also aims at making a contribution towards a better understanding of some economic conditions that are related to terrorism. For this purpose, a novel approach to the examination of the roots of terrorism has been followed. First, we run Principal Components Analysis on total GDP and its components in South Eastern Turkey in order to reduce the number of potential explanatory variables. Second, we use the first three components in a logit regression where the dependent variable consists of an index of terrorist attacks. The results of the analysis have revealed that total GDP is helpful in explaining terrorism in Turkey. Furthermore, we find evidence that agriculture and government services are more important components of GDP in explaining terrorism than factors such as trade, construction, manufacturing and transportation.

Military expenditure and employment in turkey

Even though the military expenditure - economic growth relationship has been intensively investigated in the defence economics literature, few studies have been devoted to investigate the nature of military expenditure related employment in armed forces, civil service and in the industries that supply defence material. In the literature, there is no general agreement concerning the effects of military expenditure on employment. Military spending would increase employment, as vast numbers of workers are employed either directly by military-related operations or in a variety of service or supporting roles, or spending on the armed forces may generate increased demand in the economy. However, military expenditure devoted to high-technology labour saving weapon systems can be expected to increase unemployment. The purpose of this study is to assess the importance of military expenditure, among other things, in determining the level of employment in Turkey. Employment equation is specified using a CES production function and modelled employing ARDL technique. Our findings indicate that military expenditure negatively effects employment in Turkey.

An empirical note on external debt and defence expenditures in Turkey

It is often argued that defence expenditures, and in particular arms imports, are one of the main reasons for the recent increasing trend of Turkeys external debt. This paper empirically examines the relationships between Turkeys defence expenditure and external debt for the period 1979–2000 using Engle–Granger methodology. The findings show no clear evidence of defence–debt relationships for the period analysed.

A note on defence spending in turkey: New findings

The relationship between defence spending and economic growth has been examined extensively in recent years using the Feder (1983) model. These studies suffer from poor statistical results. In this paper, the earlier findings of Sezgin (1997), which used the Feder model are re‐estimated. Firstly, the stationarity of variables is tested. Due to the non‐stationarity of some variables, regressions are performed using first differences of variables. Secondly, lags are introduced into the Feder model. The statistical results are highly improved. Not only is a strong positive association between defence spending and economic growth found for Turkey, but also human capital is positively correlated to Turkish economic growth with a lag.

A System Estimation of the Defense-Growth Relation in Turkey

The effects of military expenditure on economic growth have been examined extensively in recent years. However there is no agreement regarding the question of how and in what respects military spending affects economic growth. Feder-Ram or Deger-type multi-equation models have been estimated for a number of country studies and/or groups of countries, using both time-series and cross-sectional data (for extensive literature reviews, see e.g., Dunne, 1996; Ram, 1995; Deger and Sen, 1995; and Sandler and Hartley, 1995). Empirical studies that employ multi-equation models are comprised of three to four equations such as for growth, the savings or investment ratio, the trade balance ratio, and the defense burden. These models are estimated using twostage least squares or three-stage least squares. Even though there are a variety of studies, the results concerning the military expenditureeconomic growth relationship are mixed. Among other things, the evident inconsistency of results may be due to the varying sample periods of the studies, the underlying economic models, and the econometric techniques employed.

DO defence expenditures increase debt rescheduling in Turkey? probit model approach

This paper empirically investigates the importance of financial and political variables in determining debt rescheduling probabilities in Turkey for 1955–2000. The problem of sovereign debt default and rescheduling has been the subject of substantial academic research during the last two decades. There has been criticism of models of developing countries’ indebtedness and rescheduling that rely solely on some economic or financial predictors related to country debt, the foreign exchange sector or the domestic economic situation. Using probit analysis, this paper indicates that financial variables are important determinants of rescheduling probabilities. However, political variables are not significant in our models.