Abstract:

The aim of the study is to examine the effect of geopolitical risk index (GPR) on the military expenditures. Panel analysis method is applied by using the data of 1993-2018 period for 17 developing countries where GPR is calculated. The military expenditures are considered as the dependent variable and GPR index as an independent variable. As control variables, exports, imports and GDP per capita are taken. After determining the existence of long-term relationships between variables with Westerlund (2007) cointegration test, long-term coefficients are estimated with the panel AMG estimator. Following the estimation results, it is observed that GPR and GDP per capita have a positive effect on military expenditures. In addition, it is determined that exports affect military expenditures negatively, while imports are not found to have a statistically significant effect on military expenditures. For the short-term analysis, the causality test developed by Emirmahmutoğlu and Köse (2011) is applied and a two-way causality relationship between military expenditures and the geopolitical risk index and per capita GDP is determined. However, no causal relationship is found between exports, imports and military expenditures.

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