The Interplay between Military Expenditures and Economic Growth: The Case of East African Economies
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Date
2023
Authors
Kimaita, Stanley Kinoti
Journal Title
Journal ISSN
Volume Title
Publisher
Kenyatta University
Abstract
Over the years, the East African Community (EAC) has experienced tremendous growth in defense
spending in the advent of rising violent cross-border and domestic terrorism. The member states
reported a cumulative rising share of their military expenditure in the total global military
expenditure from 8.3% in the 1960s to 27.5%, in 2020. Concurrently, with a diminishing share of
their global GDP from 30.7% to 21.5%. African share in the global military expenditure has
revealed a 70% upsurge in the period 1970 - 2020. Irrefutably, peace and continued sustainable
economic development are the prime agenda of all EAC countries. The continuous growth in
military spending presents a new economic challenge as it competes against other public sector
needs whose importance cannot be underscored. Using a mix of empirical strategies, this study
sought to verify whether defense spending impacts economic growth in the case of the seven (7)
EAC countries since their independence (1960 - 2020). This study aimed at complementing
existing literature by further examining the effect of military expenditure on economic growth
using the Engle and Granger (1987) two-step cointegration analysis to elucidate their long-run
equilibrium relationship and the Granger tests to establish the direction of causality. The study
relied on the Stockholm International Peace Research Institute (SIPRI) annual data between 1960
- 2020 to collate military expenditure estimates, World Development Indicators (WDI), and the
EAC Information Repository to collate data on economic growth. Founded on the empirical
findings and the analysis, the study concluded that the EAC is a diverse region with varying levels
of economic development. The results from the statistical analysis indicate that the countries
included in the study exhibit variations in their GDP and military expenditure. Further, there is a
one-way causal relationship between GDP and military spending in Tanzania, Burundi, Rwanda,
and Congo (COD), but a two-way causal relationship between GDP and spending on defense in
Kenya and Uganda. This implies that rising military spending in these nations follows economic
development, with Kenya and Uganda having a favorable effect on economic growth
Description
A Research Project Submitted to the School of Business,
Economics & Tourism, Department of Economic Theory in Partial
Fulfillment of the Requirements for the Award of the Degree of
Master of Economics (Policy and Management) of Kenyatta
University.
Keywords
Military Expenditures, Economic Growth, East African Economies