Effects of investments in the defense industry on economic development: Analysis of Turkiye

The government is responsible for protecting its sovereignty and providing a safe life for its citizens by providing defense services that are fully public goods. With this responsibility, the goverments that have succeeded in directing their defense investments, which are an indispensable expenditure item, also have an important source of income. As of 2021, the amount of defense expenditures realized in the world has reached very high levels such as $2 trillion annually. While investments in the defense industry, which is a large international market, create direct foreign exchange income for the country in terms of export potential, on the other hand, the intensive use of advanced technology in this industry also mobilizes other industries within the scope of positive externality. These developments, which trigger each other, make significant contributions to the development and therefore the welfare of countries in the economic, technological, socio-cultural context. In this study, the effects of Turkiye' s investment expenditures on defense between 1974-2021 on economic development were investigated. Turkiye' s Gross domestic product (GDP) and military expenditures to GDP data for the years 1974-2021 are analyzed annually. As a method; Autoregressive Distributed Lag (ARDL) bounds test was used for cointegration and Toda Yamamoto causality test was used for causality. The ARDL bounds test shows that there is a long-term negative cointegration relationship between the variables, while the Toda Yamamoto causality test shows that there is a one-way causality relationship from defense expenditures to GDP at the significance level of 10%, and from GDP to defense expenditures at the 5% significance level. The results support the validity of the Neoclassical economic approach theory between GDP and defense expenditures.