Military Expenditure, Industrialisation, and Economic Growth in Africa : Evidence from a Panel Causality Analysis

Considerable analysis has been made of the causal relationship between military expenditure and economic growth in literature. However, the causality relationship in relation to industrialisation is yet to be investigated. This is the gap this study seeks to fill. With a balanced panel of 35 African countries spanning 1990 to 2015, this study investigates the causal relationship between military expenditure, industrialisation, and economic growth. We employed Panel Vector Error Correction Model (PVECM) causality test. The findings suggest a long-run equilibrium relationship among our variables from the panel cointegration test. At both continental and regional economic levels, the PVECM causality test suggests that industrialisation and growth causes military expenditure in the short-run and long-run. This implies that African governments fund military expenditure/activities largely by taxing production. Therefore, our results suggest that military spending can be used to achieve industrialisation and economic growth aimed at both the continental level and in regional economic Africa communities.