Effect of military spending on private investment in Nigeria: does a crowding-out effect exist?

• Raifu, Isiaka Akande ^[1]
  1. [1] University of Ibadan

     University of Ibadan

     Nigeria

     
• Localización: European Journal of Government and Economics, ISSN-e 2254-7088, Vol. 11, No. 2, 2022, págs. 167-192
• Idioma: inglés
• DOI: 10.17979/ejge.2022.11.2.8758
• Enlaces
  • Texto completo
• Resumen

  • This study adopts ARDL and VAR estimation methods to examine whether military spending crowd-out or crowd-in private investment in Nigeria. We use the data that covers the period from 1970 to 2019. Our results, based on the ARDL method, show that military spending only crowds-out private investment in the short run. In the long run, military spending crowds in private investment. The results are robust to the use of alternative estimation methods. Specifically, IRF results show that military spending has a contemporaneous negative effect on private investment. However, the negative effect turns positive after the third period. Also, FEVD results show that most of the variation in private investment is explained by its shock and few by military spending. Our findings have policy implications. While it is advisable to spend more on the military to curtail the activities of insurgents, bandits and kidnappers and to restore confidence in investors, it is important also to take cognisance of the fact that military spending can crowd out private investment.

• Referencias bibliográficas
  • Aderemi, T. A., Olayemi, H. O., Ebere, C. E., & Adeniran, A. A. (2018). Security Spending and Foreign Direct Investment Inflows: Evidence...
  • Ajefu, J. (2015) Impact of defence spending on economic growth in Africa: The Nigerian case. Journal of Developing Areas, 49(4), 227-244....
  • Akinlo, T., & Oyeleke, O. J. (2018). Effects of government expenditure on private investment in Nigerian Economy (1980-2016). Emerging...
  • Alptekin, A., & Levine, P. (2012). Military expenditure and economic growth: A meta- analysis. European Journal of Political Economy 28(4),...
  • Aminu, A., & Raifu, I. A. (2019). Dynamic nexus between oil revenues and economic growth in Nigeria. Econ Bull, 39(2), 1556-1570.
  • Apanisile, O. T., & Okunlola, O. C. (2014). An empirical analysis of effects of military spending on economic growth in Nigeria: A bounds...
  • Atanassovy, J., & Nanda, V. (2018). Crowding-out Innovation. In Proceedings. Annual Conference on Taxation and Minutes of the Annual Meeting...
  • Atesoglu, H. S. (2004). Defense spending and investment in the United States. Journal of Post Keynesian Economics, 27(1), 163-170.
  • Ayange, A., Samuel, U. E., Prince, A. I., & Ndubuaku, V. (2020). Security expenditure on economic growth in Nigeria. Humanities and Social...
  • Caruso, R., & Di Domizio, M. (2017). Military spending and budget deficits: the impact of US military spending on public debt in Europe...
  • Deger, S., (1986), Military Expenditure in the Third World Countries: The Economic Effect, Routledge and Kegan Paul, London.
  • Dunne, J. P., & Smith, R. P. (2020). Military expenditure, investment and growth. Defence and Peace Economics, 31(6), 601-614. https://doi.org/10.1080/10242694.2019.1636182
  • Edith, E. C., Abolore, Y. F., OA, A. O., & Moses, S. G. (2019). Security Spending and Foreign Direct Investment Inflows in Nigeria: An...
  • Gold, D. (1997). Evaluating the trade‐off between military spending and investment in the United States. Defence and Peace Economics, 8(3),...
  • Hou, N., & Chen, B. (2014). Military expenditure and investment in OECD countries: Revisited. Peace Economics, Peace Science and Public...
  • Jelilov, G., Ozden, K., & Briggs, S. O. (2018). Impact of insecurity on investment in Nigeria. Journal of Management, Economics, and Industrial...
  • Kennedy, P. S. J. (2021). The Effect of Defense Spending on Private Investment in Indonesia Based on Historical Data for the Period 1981-2010....
  • Keynes, J. M. (2018). The general theory of employment, interest, and money. Springer (Original work published 1936). https://doi.org/10.1007/978-3-319-70344-2
  • Kimenyi, M., Adibe, J., Djiré, M., Jirgi, A. J., Kergna, A., Deressa, T. T., & Westbury, A. (2014). The impact of conflict and political...
  • Knight, M., Loayza, N., & Villanueva, D. (1996). The peace dividend: military spending cuts and economic growth. Staff papers, 43(1),...
  • Kollias, C., & Paleologou, S. M. (2019). Military spending, economic growth and investment: a disaggregated analysis by income group....
  • Loayza, N., Knight, M., & Villanueva, D. (1999). The peace dividend: military spending cuts and economic growth. The World Bank. https://doi.org/10.1596/1813-9450-1577
  • Lorusso, M., & Pieroni, L. (2017). The effects of military and non-military government expenditures on private consumption. Journal of...
  • Malizard, J. (2015). Does military expenditure crowd out private investment? A disaggregated perspective for the case of France. Economic...
  • Mintz, A., & Huang, C. (1990). Defense expenditures, economic growth, and the "peace dividend". American Political Science Review,...
  • Morales-Ramos, E. (2002). Defence R&D expenditure: The crowding-out hypothesis. Defence and Peace Economics, 13(5), 365-383. https://doi.org/10.1080/10242690213507
  • Oji, C. E., & Afolabi, J.A. (2022). Economic and Peace Effects of Terrorism in the 21st Century. International Journal of Public Law and...
  • Okereocha, C. (2012), "Heartache for the Economy", TELL, May 14, Pp. 46 - 47.
  • Olaifa, F. G., & Benjamin, O. O. (2020). Government Capital Expenditure and Private Sector Investment in Nigeria: Co-integration Regression...
  • Olubunmi, A. A. (2018). Insecurity and Major Determinants of Foreign Direct Investment in Nigeria. International Journal of Humanities and...
  • Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of applied...
  • Pieroni, L. (2009). Does defence expenditure affect private consumption? Evidence from the United States. Economic Modelling, 26(6), 1300-1309....
  • Raifu I. A., & Afolabi, J. A. (2022). Military Expenditure and Unemployment in South Africa: Evidence from Linear and Nonlinear ARDL with...
  • Raifu I. A., Obijole, E. O. & Nnadozie, O. O. (2022). The Role of Institutional Quality in Military Spending and Unemployment Nexus in...
  • Raifu, I. A. (2021). The institutional role in oil revenue‐economic growth nexus in Nigeria. OPEC Energy Review, 45(1), 52-84. https://doi.org/10.1111/opec.12197
  • Raifu, I. A., & Aminu, A. (2020). A reconsideration of Wagner's hypothesis for Nigeria using linear and nonlinear ARDL methods. International...
  • Raifu, I. A., & Raheem, A. N. (2018). Do Government Revenues Matter for Economic Growth? Evidence from Nigeria. European Journal of Government...
  • Raifu, I. A., Aminu, A., & Folawewo, A. O. (2020). Investigating the relationship between changes in oil prices and unemployment rate...
  • Saba, S. C., & Ngepah, N. (2019). Military expenditure and economic growth: evidence from a heterogeneous panel of African countries....
  • Sajid, M. J. (2021). Continued increases in military and police spending can lead to economic collapse. In E3S Web of Conferences (Vol. 253,...
  • Scott, J. P. (2001). Does UK defence spending crowd‐out UK private sector investment? Defence and Peace Economics, 12(4), 325-336. https://doi.org/10.1080/10430710108404991
  • Shahbaz, M., Afza, T., & Shabbir, M. S. (2013). Does defence spending impede economic growth? Cointegration and causality analysis for...
  • Shan, J. (2002). A VAR approach to the economics of FDI in China. Applied Economics, 34(7), 885-893. https://doi.org/10.1080/00036840110058941
  • Sims, C. A. (1980). Macroeconomics and reality. Econometrica: Journal of the Econometric Society, 1-48. https://doi.org/10.2307/1912017
  • Smith, R. P. (1980). Military expenditure and investment in OECD countries, 1954- 1973. Journal of comparative economics, 4(1), 19-32. https://doi.org/10.1016/0147-5967(80)90050-5
  • Smith, R., & Dunne, P. (2001). Military expenditure growth and investment. Birbeck College and Middlesex University Business School, Abril.
  • Stratmann, T. & Okolski, G.L. (2010). Does government spending affect economic growth? Monetary Policy Mercatus on Policy Series June...
  • Temitope, L., & Ajala, O. (2021) Military expenditure and economic growth: Evidence from Nigeria. American Journal of Economics, 11, 10-18.
  • Thia, J. P. (2020). Deficits and crowding out through private loan spreads. The Quarterly Review of Economics and Finance, 77, 98-107. https://doi.org/10.1016/j.qref.2020.01.009
  • Üçler, G. (2016). Testing the relationship between military spending and private investments: Evidence from Turkey. Theoretical & Applied...
  • Wagner, R. E. (2007). Fiscal sociology and the theory of public finance: An exploratory essay. Edward Elgar Publishing. https://doi.org/10.4337/9781781951354
  • Yusuf, A., & Mohd, S. (2022). Growth and Fiscal Effects of Insecurity on the Nigerian Economy. The European Journal of Development Research,...