Navigating the defence-growth Nexus: the role of geopolitical risk in arms-importing countries
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2024-07-11
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en
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Abstract
This thesis investigates the intricate relationships between defense expenditure, economic
growth and geopolitical risk in the top 25 arms-importing countries from 1990 to 2022.
Utilizing a unique methodology that combines the Dumitrescu-Hurlin (2012) panel causality
test, the system of equations of Seemingly Unrelated Regression models, and the Blinder-
Oaxaca decomposition, this research offers novel insights into how these variables interact
and influence each other across different geopolitical and economic contexts. The findings
reveal a complex interplay, showing a bidirectional relationship between defense expenditure
and geopolitical risk. Additionally, the relationship between geopolitical risk and economic
growth is mediated through inflation and trade channels. The research identifies significant
regional variations and differences between economic development stages, suggesting that
factors such as economic development, political stability and regional security dynamics play
crucial roles in shaping these interactions. Furthermore, the thesis demonstrates a significant
impact of security alliances, such as NATO membership, on these dynamics. These differences
underscore the need for models that account for these complexities to better inform policy
decisions aimed at balancing national security with sustainable economic development in an
uncertain global environment.
Keywords: Geopolitical Risk | Defense Expenditure | Economic Growth |Arms Imports
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Faculteit der Managementwetenschappen