The Nexus Between Defense Spending and Growth: Empirical Analysis of First Euro Users

The purpose of this research is to investigate the cointegration and causality among defense spending and economic growth and to emphasize the basic relationship between them. In the study, the very first users of the euro as a currency in European Union has been researched with panel data cointegration and causality techniques and tried to fill the gap in the literature related to the defense spending-economic growth relation in euro using countries. The results show that, there is a long run cointegration but there is not any causal relationship between defense spending and economic growth. In the literature, the majority of the work related to this topic focalize on a single country and use time series analysis. The remaining works focalize on a society of countries and use panel data analysis. However, in the literature there is lack of work analysing the euro using countries in European Union. From this perspective, since there is no previous study including solely euro using countries, this study distinguishes from other studies.