Economic Consequences of Lower Military Spending: Some Simulation Results
March 1, 1993
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Summary
The IMF MULTIMOD model is used to trace the economic impact of a 20 percent reduction in world military expenditures. GDP falls in the short run, however private consumption and investment rise, leading to an increase in GDP in the medium and long run. The estimated gains to economic welfare are substantial, particularly for developing countries, although most of these gains are realized in the long run. A positive international economic externality is found to exist, implying that for any given country the economic gains from a coordinated reduction in military expenditures exceed the gains from a unilateral reduction.
Subject: Consumption, Defense spending, Expenditure, Imports, International trade, National accounts, Private consumption
Keywords: aggregate consumption gain, Consumption, Defense spending, Eastern Europe, economic growth, expenditure cut, GDP rise, Global, government consumption, Imports, increase consumption, investment expenditure, military expenditure, Private consumption, private sector, transfer expenditure, U.S. dollar, WP
Pages:
48
Volume:
1993
DOI:
Issue:
017
Series:
Working Paper No. 1993/017
Stock No:
WPIEA0171993
ISBN:
9781451843460
ISSN:
1018-5941
