The defence-growth nexus revisited:Evidence from the israeli-arab conflict

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8 Scopus citations


This paper revisits the defence-growth nexus for the rivals of the Israeli-Arab conflict over the last four decades. To this end, we utilize the Toda and Yamamoto (1995) causality test and the generalized variance decomposition. Contrary to the conventional wisdom and many earlier studies, we fail to detect any persistent adverse impact of mili- tary expenditures on economic growth. Our conclusions are kept intact even when we account for the possibility of endogenous structural breaks and during the post-1979 peace treaty period. Our findings imply insignificant peace dividends once the conflict is resolved and the military spending is cut to internationally acceptable standards.

Original languageEnglish
Pages (from-to)291-300
Number of pages10
JournalDefence and Peace Economics
Issue number4
StatePublished - 5 Aug 2010


  • Causality
  • Generalized forecast error variance decomposition
  • Growth
  • Israeli-Arab conflict
  • Middle East

ASJC Scopus subject areas

  • Social Sciences (miscellaneous)
  • Economics and Econometrics


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