To overcome this problem of non-stationarity and prior restrictions on the lag structure of a model, econometric analysis of time series data has increasingly moved towards the issue of co-integration. The reason being that, co-integration is a powerful way of detecting the presence of steady state equilibrium between variables. In applied econometrics, Autoregressive Distributed Lag (ARDL) co-integration technique or bound test of co-integration techniques have become the solution to determining the long run relationship between series that are non-stationary, as well as re-parameterizing them to the Error Correction Model (ECM). ARDL co-integration technique is preferable when dealing with variables that are integrated of different order, I(0), I(1) or combination of the both and, robust when there is a single long run relationship between the underlying variables in a small sample size. The long run relationship of the underlying variables is detected through the F-statistic (Wald test).
Published in Chapter:
Relationship Between Military Expenditure, Economic Growth, and Social Expenditure in India, China, and Bangladesh
Rajib Bhattacharyya (Hooghly Mohsin College, India)
Copyright: © 2018
|Pages: 22
DOI: 10.4018/978-1-5225-4778-5.ch016
Abstract
One of the most debated phenomena of recent times in the global scenario is whether there really exists a true opportunity cost of a sequential increase in global military expenditure across the world. The existing literature on the relationship between military expenditure and economic growth confirms that three kinds of linkages may be plausible: positive, negative, and no significant linkages. The chapter focuses on contradictions and conflicts between military expenditure and social expenditure such as health and education. The chapter also attempts to examine both the long-run and short-run relationship between defense expenditure (DE), health expenditure (HE), educational expenditure (EE), and economic growth (changes in GDP). Here the autoregressive distributed lag approach (ARDL) and error correction model (ECM) technique have been applied to examine the long- and short-run causality among the variables. The study observes that there exists no significant long-term relationship between economic growth, defense expenditure, health expenditure, and educational expenditure in India and China, but Bangladesh does have one.