Unemployment Effects of Military Spending in Turkey

Abstract

The impact of military spending on macroeconomic performance has been a long-debated issue. In this context, there are a vast number of studies focused on the impact of military spending on the economies and the direction of this impact. Most of these studies have examined the relationship between military spending and economic growth. Unemployment, however, is a macroeconomic indicator that cannot be separated from economic growth. Hence, this study aims to reveal the relationship between military spending and the unemployment rate of Turkey, which is a developing country. To this end, Bounds Testing approach based on the structural break Autoregressive Distributed-Lag Model (ARDL) has been performed to suggest the impact of the military spending on the unemployment rate, using the 1988-2017 period data of Turkey. The findings demonstrate that there is no statistically significant correlation between the military spending and unemployment rate in the short run; however, it is determined that the military spending decreases the unemployment rate in the long run.