Abstract:

In this study, Benoit hypothesis was tested using panel data method for years 1991-2014, in terms of the direction of the relation between the economic growth and defense expenditures of Turkey and Middle East countries. Two different models were set in terms of application results. Generally speaking with the constructed models, it is reached that there is a negative relationship between economic growth and defense expenditures; hence the neo-classical opinion is dominant. When looking on the basis of the countries’ coefficients, making defense expenditures leads to reduction of economic growth for Model 1. Coefficients of Iran and Turkey indicate that these countries perform at the optimum level of defense expenditures. In addition, when level of development is increased countries’ expenditures on defense is decreased. The results of Model 1 show that Iran and Turkey is more developed countries than other Middle Eastern countries. For Model 2 Iran’s negative coefficient shows that the optimal level of Iran's defense expenditure is unable to determine. Turkey’s coefficient shows that the optimum level of defense expenditure is able to determine. Also considering the region which all the countries in, the importance of defense expenditures comes to the foreground.