Item Details
Skip Navigation Links
   ActiveUsers:4734Hits:25704594Skip Navigation Links
Show My Basket
Contact Us
IDSA Web Site
Ask Us
Today's News
HelpExpand Help
Advanced search

In Basket
  Journal Article   Journal Article
 

ID155301
Title ProperMeasuring the impact of military spending
Other Title Information how far does a DSGE model deviate from reality?
LanguageENG
AuthorLin, Eric S ;  Wu, Yi-Hua ;  Ho, Chih-Chin
Summary / Abstract (Note)Dunne, Smith, and Willenbockel (2005) argue that the mainstream growth literature has not found military spending to be a significant determinant of economic growth, yet much of the defense economics literature has noted significant effects. This paper revisits this issue by using a DSGE-VAR approach, combining both theoretical and empirical methods. We present that the DSGE approach (estimated with the Bayesian technique) and the Bayesian VAR with the Minnesota Prior both lead to worse in-sample fit than our proposed DSGE-VAR framework. The DSGE-VAR approach reveals that a positive military spending shock boosts the U.S. economy, increasing per capita real GDP growth, consumption, inflation and interest rate. Our results are robust to alternative model specifications. Future investigations such as exploring an optimal military spending policy could adopt the approach in this paper to determine the best model – empirical, theoretical, or a combination of the two.
`In' analytical NoteDefence and Peace Economics Vol. 28, No.5; Oct 2017: p.585-608
Journal SourceDefence and Peace Economics Vol: 28 No 5
Key WordsU.S. Military Spending ;  DSGE-VAR ;  Model Misspecifications


 
 
Media / Other Links  Full Text