Causality relationship between military expenditures and economic indicators: The case of Turkey (1980-2023)

Defense expenditures are expenditures made by countries to ensure their security and stability. Throughout history, military power has been one of the most fundamental indicators of state legitimacy. Today, increasing global threats and regional conflicts are driving countries to increase their defense spending regardless of economic concerns. Turkey's geopolitical location makes defense demands high; the country is both an exporter and importer of defense. Therefore, examining the economic impact of defense spending is crucial. This study consists of three sections and a conclusion. The first section will examine the concept of defense, the structure of the defense industry, and defense spending within a conceptual framework. The second section will examine the historical development of Turkey's defense spending from the Ottoman Empire to the present, the global trajectory of defense spending, and the economic impact of these expenditures. In the third part, the long and shortterm relationships between gross domestic product (GDP), military expenditures, foreign trade volume and fixed capital investments in Turkey between 1980 and 2023 were analyzed through the Johansen-Juselius Cointegration Test and Vector Error Correction Model (VECM). The findings indicate the existence of two cointegration relationships among the variables. According to the long-term analysis results, a positive relationship was found between defense spending and foreign trade volume, and a negative relationship was found between fixed capital investments and defense spending. However, the relationship between GDP and defense spending was not found to be statistically significant in the long run. Findings from the VECMbased causality analysis reveal a significant long-term causality relationship between defense spending and other economic indicators, but no short-term causality relationship was found.