Assessing the impact of military expenditures on economic growth: A case study of Azerbaijan
Analyzing the connection between military expenditure and economic growth is interesting due to its policy implications, particularly in geopolitically strategic regions. In the case of Azerbaijan, where defense spending accounts for a significant share of the national budget, this relationship is e...
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LLC "CPC "Business Perspectives"
2025-03-01
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| Series: | Problems and Perspectives in Management |
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| Online Access: | https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/21722/PPM_2025_01_Hasanov.pdf |
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| author | Ramil Hasanov Zeynab Giyasova Mustafa Kemal Oktem Vusal Guliyev Rashad Salahov |
| author_facet | Ramil Hasanov Zeynab Giyasova Mustafa Kemal Oktem Vusal Guliyev Rashad Salahov |
| author_sort | Ramil Hasanov |
| collection | DOAJ |
| description | Analyzing the connection between military expenditure and economic growth is interesting due to its policy implications, particularly in geopolitically strategic regions. In the case of Azerbaijan, where defense spending accounts for a significant share of the national budget, this relationship is especially relevant. The present study explores the long-term equilibrium between military expenditure, expressed as a percentage of GDP, over a three-decade period marked by consistent economic growth and substantial defense investments. To investigate this relationship, the study applies the Johansen cointegration method to check for a stable long-term relationship. It employs the Granger causality test to determine the causal direction between the variables. The findings show cointegrating relationships, indicating a long-term equilibrium between military expenditure and economic growth. Furthermore, the Granger causality analysis indicates a bidirectional causal link, implying that changes in military expenditure influence GDP per capita growth and vice versa. Specifically, the results show that military expenditure Granger causes GDP per capita at a lag of 3 (p-value = 0.012). Similarly, GDP per capita Granger causes military expenditure at the same lag (p-value = 0.0001). The findings reveal the dual impact of military spending on economic development, providing insights for Azerbaijani policymakers to balance defense needs with economic growth. |
| format | Article |
| id | doaj-art-bce947cef6a646e79ca14d556e207d09 |
| institution | DOAJ |
| issn | 1727-7051 1810-5467 |
| language | English |
| publishDate | 2025-03-01 |
| publisher | LLC "CPC "Business Perspectives" |
| record_format | Article |
| series | Problems and Perspectives in Management |
| spelling | doaj-art-bce947cef6a646e79ca14d556e207d092025-08-20T03:05:39ZengLLC "CPC "Business Perspectives"Problems and Perspectives in Management1727-70511810-54672025-03-0123139240110.21511/ppm.23(1).2025.2921722Assessing the impact of military expenditures on economic growth: A case study of AzerbaijanRamil Hasanov0https://orcid.org/0000-0003-4267-7039Zeynab Giyasova1https://orcid.org/0000-0003-3557-4832Mustafa Kemal Oktem2https://orcid.org/0000-0002-2040-426XVusal Guliyev3https://orcid.org/0000-0002-9729-8637Rashad Salahov4https://orcid.org/0000-0002-9209-6841Ph.D.(c), UNEC Research Center on Global Environmental Issues, Azerbaijan State University of Economics (UNEC), Azerbaijan; Research and Innovation Center, Western Caspian University (WCU), AzerbaijanPh.D., Department of Economy, Azerbaijan State University of Economics (UNEC), Azerbaijan; Department of Economics and Statistics, Azerbaijan Technical University, AzerbaijanDr., Professor, Department of Business Administration, Hacettepe University, TurkeyPh.D., Department of Economy, Azerbaijan State University of Economics (UNEC), AzerbaijanPh.D., Department of Economy, Azerbaijan State University of Economics (UNEC), AzerbaijanAnalyzing the connection between military expenditure and economic growth is interesting due to its policy implications, particularly in geopolitically strategic regions. In the case of Azerbaijan, where defense spending accounts for a significant share of the national budget, this relationship is especially relevant. The present study explores the long-term equilibrium between military expenditure, expressed as a percentage of GDP, over a three-decade period marked by consistent economic growth and substantial defense investments. To investigate this relationship, the study applies the Johansen cointegration method to check for a stable long-term relationship. It employs the Granger causality test to determine the causal direction between the variables. The findings show cointegrating relationships, indicating a long-term equilibrium between military expenditure and economic growth. Furthermore, the Granger causality analysis indicates a bidirectional causal link, implying that changes in military expenditure influence GDP per capita growth and vice versa. Specifically, the results show that military expenditure Granger causes GDP per capita at a lag of 3 (p-value = 0.012). Similarly, GDP per capita Granger causes military expenditure at the same lag (p-value = 0.0001). The findings reveal the dual impact of military spending on economic development, providing insights for Azerbaijani policymakers to balance defense needs with economic growth.https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/21722/PPM_2025_01_Hasanov.pdfAzerbaijancausality testingcointegration analysiseconometricseconomic growthGDP |
| spellingShingle | Ramil Hasanov Zeynab Giyasova Mustafa Kemal Oktem Vusal Guliyev Rashad Salahov Assessing the impact of military expenditures on economic growth: A case study of Azerbaijan Problems and Perspectives in Management Azerbaijan causality testing cointegration analysis econometrics economic growth GDP |
| title | Assessing the impact of military expenditures on economic growth: A case study of Azerbaijan |
| title_full | Assessing the impact of military expenditures on economic growth: A case study of Azerbaijan |
| title_fullStr | Assessing the impact of military expenditures on economic growth: A case study of Azerbaijan |
| title_full_unstemmed | Assessing the impact of military expenditures on economic growth: A case study of Azerbaijan |
| title_short | Assessing the impact of military expenditures on economic growth: A case study of Azerbaijan |
| title_sort | assessing the impact of military expenditures on economic growth a case study of azerbaijan |
| topic | Azerbaijan causality testing cointegration analysis econometrics economic growth GDP |
| url | https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/21722/PPM_2025_01_Hasanov.pdf |
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