Defense Expenditure, Inflation and Economic Growth:Evidence from Taiwan and China

• Main Authors: Ching-Hui Lin, 林璟匯
• Other Authors: Wei-Kang Wang
• Format: Others
• Language: zh-TW
• Published: 2010
• Online Access: http://ndltd.ncl.edu.tw/handle/87362884809547056471

碩士 === 國防大學管理學院 === 財務管理學系 === 98 === China's economic growth and military power have been improving dramatically in recent years. However, China increases expenditure on military to improve its military power which already exceeds its self-defense need and makes the other countries of Asia raised doubt its intention. Therefore, the primary goal of Defense Policy in Taiwan is constructing enough defense strength and reaching the strategic deterrence to support its national security under the limited defense budget. The paper examines the relationship among defense expenditure, economic growth and inflation and applies Barro’s model of endogenous growth to construct vector auto regressive model in Taiwan and China over the period 1952 to 2008. The above periods are also divided into two sub-periods, the pre-economic reform period (1952-1978) and the post-economic reform period (1979-2008), to gain better insight into the above mentioned issues. The study finds that economic growth has positive significantly effect on inflation and defense expenditure in Taiwan for the period 1952-2008, but inflation shows negative significantly effect on economic growth in Taiwan for the period 1952-1978. The results also indicate that economic growth exist negative significantly relationship to inflation and has positive significantly relationship to defense expenditure in China for the period 1952-2008. On the contrary, economic growth points out positive effect on inflation while inflation reveals negative effect on economic growth in China for the period 1978-2008.