The validity of the Armey curve in the correlation between defense expenditures and economic growth: Example of Middle East countries

Defense expenditures take an important place among expenditure items in order for countries to maintain their existence, unity and security against possible internal and external threats. Due to its geopolitical position, natural resource reserves and having an important place in the world's energy supply, it causes an increase in the allocated share of defense expenditures from public expenditures in the Middle East region. However, the increase in defense expenditures causes a decrease in invesments in edication, health, infrastructure and other fields.The reduction of invesment and consumption expenditures lower the economic growth. In this study, the validity of the Armey curve in the correlation between defense expenditures and economic growth in the Middle East countries was examined by using the smooth transition panel regression model as of the 2000-2019 period. According to the findings, it was concluded that the threshold level of defense expendituresis 9,9%. It affects economic growth positively when defense expenditures realized below the threshold level. However, the increase in defense expenditures reduces the increase in economic growth if it is above the threshold level. In the Middle Eastern countries, an inverted U-shaped Armey curve is not valid. In this context, the threshold level should be taken into account in order to ensure the continuity of the positive effect of the increase in countries defense expenditures on the economic growth.