An Arms Race between South and North Korea: A Causality Test
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This study explores a possibility of an arms race between South and North Korea using Granger causality test for the period 1953-2002. An error correction model in a multivariate framework including South Korea’s GDP is employed. The estimation results indicate no existence of an arms race between two Koreas but a unidirectional causality running from defense spending of North Korea to that of South Korea. In addition, two more unidirectional causalities have been detected from defense spending of South Korea to GDP of South Korea and from GDP of South Korea to defense spending of North Korea. These findings suggest that to resolve the current economic crisis in North Korea, she should divert her defense spending to other more productive ends.
Abstract
This study explores a possibility of an arms race between South and North Korea using Granger causality test for the period 1953-2002. An error correction model in a multivariate framework including South Korea’s GDP is employed. The estimation results indicate no existence of an arms race between two Koreas but a unidirectional causality running from defense spending of North Korea to that of South Korea. In addition, two more unidirectional causalities have been detected from defense spending of South Korea to GDP of South Korea and from GDP of South Korea to defense spending of North Korea. These findings suggest that to resolve the current economic crisis in North Korea, she should divert her defense spending to other more productive ends.
참고문헌 (18)
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