2/2023 Łukasz Wiktor Olejnik. Economic growth and military expenditure in the countries on NATOʼs Eastern flank in 1999–2021
Working Papers of Eesti Pank 2/2023
This paper studies how military expenditure impacted economic growth in nine Central and Eastern European countries in 1999–2021 using a newly created dataset of disaggregated military expenditures. The results of estimating an ARDL growth model with military expenditure confirm that various kinds of military expenditure had a negative and statistically significant influence on economic growth in the
longer run, and show that personnel expenditures and labour market adjustments were the most important channel of influence. Equipment purchases and army maintenance also have a negative influence on GDP growth, but that influence is smaller. Fiscal multipliers of military expenditure were estimated using the Local Projections method to measure the short-run effects, and values below unity were
obtained. The short-run fiscal multipliers of military expenditure are 0.2–0.5 lower than the fiscal multipliers of non-military government consumption.
JEL Codes: H56, O11
Keywords: military expenditures; military expenditures and economic growth; fiscal multiplier; fiscal adjustments