These are the two techniques generally used in the time series econometrics. VEC is Vector Error Correction method and VAR is Vector Auto regression method. When two variables are cointegrated, then they must be presented by Error Correction mechanism. This tool proves the stability of the long run relationship. The estimated coefficient of ECM term generally shows negative sign and less than one. It is also known as speed of adjustment. How the previous error is corrected in the present time is reflected by this term. Short run causality can be observed from VEC model estimation. On the other hand, for getting long run causality we apply VAR model. This model can be applied even if two variables are not cointegrated.
Published in Chapter:
Military Expenditure and Economic Growth Relationship Revisited in Some South Asian Countries: With Special Reference to India
Kanchan Datta (University of North Bengal, India)
Copyright: © 2018
|Pages: 26
DOI: 10.4018/978-1-5225-4778-5.ch008
Abstract
To protect the motherland from foreign invasion, to maintain peace and stabilize border tension, to maintain a balance of strength among neighboring countries, military expenditure is inevitable. On the other hand, if huge money is spent to continue the war game with neighboring countries that shrinks the funds available for investing in health, education, infrastructure, and industrialization. Under this controversy, some researchers feel increase in military expenditure raises national income through multiplier effect, but another group thinks it crowds out investment for generating employment and reduction of poverty especially in developing countries. In this chapter an attempt has been taken to investigate the relation between military expenditure and its impact on economic growth of some South Asian nations (e.g., India, Pakistan, Sri Lanka, and Bangladesh) by giving special importance to India.