REGIME DEPENDENT RELATIONSHIP BETWEEN ECONOMIC GROWTH AND MILITARY SPENDING IN SUDAN: A MARKOV REGIME SWITCHING ANALYSIS

Abstract

The changes in the military expenditure of Sudan (increases or decreases) may be subject to changes in the economic growth of the country. This asymmetric relationship between the two variables can not be tested through linear time series models. The Markov regime-switching model is an alternative technique that is used to investigate the subject asymmetric relationship between economic growth and military spending. The current study utilizes two-state Markov regime-switching models to investigate the impact of military spending on economic growth for Sudan over the period from 1961 to 2019. Two key findings emerged from the analysis. First, the relationship between military spending and economic growth is state dependent. Second, in a high-growth regime (low standard error), the impact of military spending on economic growth is positive, while in a low-growth regime (high standard error), the reverse holds. The findings of the study suggest that in a low growth regime, an increase in military spending is detrimental to economic growth and vice versa.