Title Page
Contents
Abstract 6
1. INTRODUCTION 7
2. LITERATURE REVIEW 9
3. DATA AND METHODOLOGY 11
3.1. Data Description 11
3.2. Stationarity 12
3.3. Granger Causality Test 13
3.4. VAR Specification 13
3.5. Impulse Response Function and Variance Decomposition 14
3.6. Analysis with Indirectly Linked Variables 16
4. CONCLUSION 20
Data Appendix 21
References 22
Table 1. Proportion of Military Spending and Non-military Spending to GDP 8
Table 2. Average Growth Rate of Military Spending and GDP 9
Table 3. Descriptive Statistics 11
Table 4. Stationarity Test Results 12
Table 5. Granger causality test results 13
Table 6. VAR Lag Order Selection Criteria Results 14
Table 7. Variance Decomposition 16
Table 8. Descriptive Statistics of Additional Variables 17
Table 9. PP t-test Results 17
Figure 1. Graphical representation of GDP, MS and NMS 12
Figure 2. Impulse Responses of GDP 15
Figure 3. Impulse Responses to DMS shocks 19
Figure 4. Impulse Responses to DNMS shocks 19