THE RELATIONSHIP BETWEEN GLOBALIZATION AND MILITARY EXPENDITURES IN G7 COUNTRIES: EVIDENCE FROM A PANEL DATA ANALYSIS

This study explores the causal linkages between military expenditure and globalization in G7 countries (i.e. Canada, France, Germany, Italy, Japan, the UK, and the USA) by analyzing data for the period 1988-2011. Panel causality was examined to explain dependency and heterogeneity across countries. The results of one-way Granger causality show that globalization influenced military expenditures in Germany, and Japan. Moreover, there was no evidence that military expenditures caused globalization in any G7 country. The evidence from Italy shows interaction causality between globalization and military expenditure. Bootstrap panel Granger causality tests show that the causality between globalization and military expenditure varies across countries with different conditions. The findings of this study could provide important policy implications for the G7 countries under study.