The Relationship Between Defence Expenditure, Trade Openness and Foreign Direct Investments: The Case of BRICS and MINT Countries

Abstract

This study examines the relationship among trade openness, foreign direct investments and defence expenditures for the BRICS and MINT countries in the 1990-2019 period. As analysis method, it was estimated by Pesaran (2008) Cross-Section Dependency test, Hadri-Kuruzomi (2012) panel unit root test, Pesaran (2006) CCE test and Emirmahmutoglu and Kose (2011) panel causality tests. According to the test findings, a bidirectional causality relationship was found between defense expenditures and foreign direct investments for BRICS countries. In addition, for MINT countries, there is a one-way causality relationship from defense expenditures to foreign direct investments and from trade openness to defense expenditures.

Keywords: Defence Expenditures, Trade Openness, Foreign Direct Investment, Panel Causality Analysis.

DOI: 10.7176/JESD/13-4-01

Publication date: February 28^th 2022