Military spending and economic growth in sri lanka: A time series analysis

In this paper, we employ a VAR analysis to examine the nexus between military spending and economic growth in Sri Lanka which, due to the civil war there, has witnessed a significant increase in military spending over the last three decades while also recording healthy economic growth. The study finds that, compared with non-military spending, military spending exerts only a minimal positive impact on real GDP. Over a 10-year period, a 1% increase in nonmilitary spending increases GDP by 1.6%. In contrast, military spending only increases GDP by 0.05%, suggesting that the economic benefits for Sri Lanka from a sustained peace may be considerable.