Examining the Military Spending Economic Growth Nexus in the Presence of Informality: Evidence from the Balkan Peninsula

This paper examines the military expenditure (milex) economic growth nexus, in selected Balkan and peripheral countries from 1990 to 2022, considering the presence of informality within an institutional framework. Specifically, we employ Principal Components Analysis (PCA) to formulate an index of informality and use the Dynamic Ordinary Least Squares (DOLS) and Fully-Modified Ordinary Least Squares (FMOLS) methods to identify the long-run equilibria. To provide a more comprehensive insight, the study also incorporates two types of causality tests – Dumitrescu-Hurlin and Juodis et al. – to determine the direction of the relationships. Our findings indicate that in the long-run milex can be detrimental to economic growth whilst informality boosts it.

This is an Accepted​ Manuscript of an article published by De Gruyter​ in Peace Economics, Peace Science and Public Policy on 20/09/2024, available at: https://doi.org/10.1515/peps-2024-0029
It is deposited under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives License (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-commercial re-use, distribution, and reproduction in any medium, provided the original work is properly cited, and is not altered, transformed, or built upon in any way. If you wish to use this manuscript for commercial purposes, please contact rights@degruyter.com.