Earning a Peace Dividend in a Crisis Environment: The Greek Case

Abstract

AbstractIn this paper we attempt to assess the extent to which conversion policies involving the shift of resources from the defence to the non-defence sector may entail some form of peace dividend for the economy of Greece. The issue has become one of increasing importance during the past few years during which the demand for growth-supporting policies has been a top priority requirement as an antidote to the recession. The paper employs a VAR model in order to investigate the interactions among the growth rate of gross domestic product and alternative measures of defence expenditure. We find that defence spending and more so, expenditure on defence equipment, under the present circumstances in which the bulk of the procurement represents import payments is not related in any form of Granger-causal relationship with the economic growth of Greece. Our results point to the fact that there can be no possibility of a peace dividend under the circumstances prevailing, unless defence procurement policies shift to an import – substitution strategy.