The Nexus between Political Instability, Defence Spending and Economic Growth in the Middle East Countries: Bootstrap Panel Granger Causality Analysis

AbstractThis paper investigates the direction of causality between political instability, defence spending andeconomic growth for 12 MENAT countries during the period 1988-2013 within a panel data framework,which considers the issues of cross-sectional dependency and slope heterogeneity among countriesinvestigated simultaneously. We find a positive causality relationship from political instability anddefence spending to economic growth for only Lebanon; a positive causality relationship from politicalinstability and economic growth to defence spending for Jordan, Lebanon, Saudi Arabia, Morocco andTurkey; a positive causality relationship from economic growth and defence spending to politicalinstability for Egypt, Israel and Turkey. Thus, empirical results point out that the military as agovernment institution have played the central role of upon economic growth and political instability forLebanon, Egypt, Israel and Turkey