Abstract:

This study examines the positive relationship between geopolitical risk indices and military expenditures of countries based on an analysis conducted on 41 countries for the period of 1993-2021. The main objective of the study is to test the hypothesis that high geopolitical risk leads to high military expenditures. The countries that converge to each other on the basis of geopolitical risk index and military expenditure variables are grouped by using the Phillips ve Sul (2007, 2009) club convergence method. According to the analysis results, 5 Clubs in terms of geopolitical risk index and 4 Clubs in terms of military expenditures are being formed. While the countries with the highest geopolitical risk index are the United Kingdom, Russia, and the United States, the countries with the highest military expenditures are the United States, Russia, Ukraine, Israel, South Korea, Mexico, Colombia, and Tunisia. Chile, Peru, and Portugal, which have the lowest geopolitical risk index, are clustered in Club 2 and Club 3 in the military expenditures category. The countries that overlap in the common clubs in terms of geopolitical risk index and military expenditure categories are Russia and the United States in Club 1, China and France in Club 2, Germany, Japan, Italy, and Egypt in Club 3, and Venezuela, Argentina, Philippines, South Africa, Switzerland, Indonesia, and Malaysia in Club 4. The findings of the overlapping 15 countries provide the assessment that the military expenditure volumes of the countries whose geopolitical risk indices are converging are also converging within the same club, leading to a casualty. However, the empirical findings prove that there are differences among the countries in terms of the effects of high geopolitical risk on military expenditures.

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