Military Spending and Economic Growth in Pakistan: A Regime Switching Analysis
Author: Waqar Qureshi

The proposed study explore the dynamics (nonlinear effect of military spending on economic growth) influence of military expenditure on economic growth in Pakistan covering the period 1973 to 2014. The results of different specification of two-state Markov switching models with Constant Transition Probability (CTP) and Time Varying Transition Probabilities (TVTP) recommend that the military spending growth nexus is state dependent. The outcomes of the fixed transition probability Markov switching models propose that there is inverse relationship between military expenditure and economic growth in high variance state (low growth regimes) compatible with crowding out effect while the two variables are positively related in low variance state (high growth regimes) compatible with the Keynesian income multiplier. More specifically, the results of time varying transition probability model suggest that the switch from high variance state (low growth regimes) to low variance state (high growth regimes) is also detected by the positive and significant estimate of the indicator variables. If the estimate of this parameter is positive and significant then it means that the probability of being staying in the high variance state (low growth periods) is increasing. Supervisor:- Dr. Iftikhar Ahmad

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Keywords : Economic Growth, Military Spending, Pakistan
Supervisor: Iftikhar Ahmad

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