A tale of five stories: Defence spending and economic growth in NATO´s countries

Abstract

This article examines the relationship between defence expenditure and its impact on the growth of NATO’s countries between 2005 and 2018. The aim is to determine if this relation exists and to test if it is possible to discover different models across the countries. The results obtained using the Arellano–Bond estimator, suggest that there is more than one model, and confirm, through the poolability test, the existence of five different groups of countries within the Alliance, with different impacts of the defence expenditure on their gross domestic product. These findings are in line with the review of existing literature that reveals heterogeneity in the results due to different parameters used.