Abstract

The paper explores the nexus between defense spending and economic growth in the five ASEAN countries namely, namely Indonesia, Malaysia, Philippines, Singapore and Thailand over the period 1988 - 2007. The empirical analysis is based on co-integration and causality test at the individual level and panel level. The findings suggest the presence of unidirectional causality from economic growth to defense spending in Indonesia, Malaysia, Singapore and Thailand. It also finds the feedback between defense spending and economic growth in Philippines at the individual level and at the panel of ASEAN- 5. The implication of this research is that neither economic growth nor defense spending can be considered as exogenously determined.

Key words: Economic growth, defense spending, panel co-integration.