An analysis of defence spending in Spain: A long-run approach

This paper analyses the behaviour of Spanish public spending on defence for the period 1850-1995. Through the use of recent cointegration and unit root techniques, we demonstrate the existence of an equilibrium relationship between this variable and Spanish GDP during the years in question. Furthermore, the income elasticity of this relationship is shown to be equal to one. Finally, the detection and removal of a number of additive outliers, all of them related to different periods of military conflict, appears to be vital in obtaining these results.