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Disaggregated military expenditure and the debt level in Nigeria

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Abstract

The aim of this paper is to investigate the effect of military spending on both external debt and internal debt in Nigeria for the period of 1981–2012. Unlike the existing literature, the total military expenditure series is further disaggregated into recurrent and capital military expenditures. We employ a newly-introduced combined cointegration approach to test for long run relationship in the variables. After establishing cointegration relationship, the ARDL, FMOLS and DOLS methods are used in computing the long run estimates. Overall, our results reveal that a rise in military spending promotes external and internal debt, with recurrent expenditure having more impact on the level of indebtedness.

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Notes

  1. In the equations involving both external and domestic debts, we do not include capital military expenditure and recurrent military expenditure in the same equation because doing so generate severe multicollinearity.

  2. To estimate the optimal lag length, we employ the method that was introduced by Ng and Perron (1995).

  3. Although the auto regressive distributed lag (ARDL) method of Pesaran et al. (2001) is also used to test for cointegration in the variables, we do not repeat the modelling process here because of the fact that it is prevalent in the literature (see Solarin and Shahbaz 2013).

  4. Although we use three long run estimation techniques including the ARDL, FMOLS and DOLS, we only explain FMOLS due to the prevalence of literature dealing with ARDL and DOLS (see Solarin and Shahbaz 2013; Wooldrigde 2009).

  5. The optimal lag length is based on the Bartlett window.

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  1. Faculty of Business and Law, Multimedia University Malaysia, Room 5012, Melaka, Malaysia

    Sakiru Adebola Solarin

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Solarin, S.A. Disaggregated military expenditure and the debt level in Nigeria. Qual Quant 51, 1687–1705 (2017). https://doi.org/10.1007/s11135-016-0360-z

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