The relationship of economic growth and defense expenditures in Turkey: Evidence from the analysis of exists

Military expenditures, which are a part of public expenditures, have a significant share in a country's national budget. Therefore, economic growth is affected by changes in military expenditures. Although the relationship between military expenditures and economic growth has been investigated since the late 1970s, there is no consensus yet regarding the findings of studies on the subject. In addition, the decrease in military expenditures came to the fore in the world after the Cold War, but Turkey continued to increase its military expenditures due to its geographical location. In this study, the relationship between defense expenditures and economic growth in Turkey for the period 1990-2020 was investigated by time series analysis. According to the findings of this study, it was determined that there is a long-term relationship between Turkey's defense expenditures and economic growth through the cointegration test. According to the FMOLS test result, it was determined that a 1% unit increase in defense expenditures reduced economic growth by 0.82%. According to the DOLS test result, it was determined that a 1% unit increase in defense expenditures reduced economic growth by 1.37%. According to the impulse-response function, a shock to defense expenditures negatively affected economic growth in the first year. This effect lasts until the middle of the fourth year. Towards the end of the fourth year, the effect turns positive, but in the fifth year it becomes negative again and the response of economic growth disappears at the end of the fifth year. According to the variance decomposition findings, it was revealed that the factor that most affects economic growth is inflation. According to the findings, it has been seen that the Neo-Classical Approach is valid in Turkey. Since military expenditures are still an important factor affecting Turkey's economic performance, the findings from this study are thought to be important.