The Impact of Worldwide Military Spending Cutson Developing Countries

IMF Working Papers, November 1, 1993

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The Impact of Worldwide Military Spending Cutson Developing Countries

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Bibliographic details

• Authors: Steven A. Symansky, Tamim Bayoumi, Daniel P. Hewitt
• Published: November 1, 1993
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451850802.001

Overview

• Authors: Steven A. Symansky, Tamim Bayoumi, Daniel P. Hewitt
• Publication date: November 1, 1993
• Format: IMF Working Paper No. 1993/086, Issue: 086, Volume: 1993, Pages: 38
• DOI: https://doi.org/10.5089/9781451850802.001
• Stock No: WPIEA0861993
• ISBN: 9781451850802
• ISSN: 1018-5941
• Model used: specially modified version of the MULTIMOD world economic model
• Subject keywords: Defense spending, Expenditure, Exports, Foreign exchange, Imports, International trade, National accounts, Private consumption, Real exchange rates
• Selected region/keyword tags as in source: Africa; Eastern Europe; Western Hemisphere; developing country region; b. developing country region; arms export; arms import; Cutson developing countries; developing countries benefit; developing country economy; developing country framework; expenditure pattern; government spending; leads to a decrease; military expenditure; military spending; Private consumption; region of the world; WP

Principal simulation result

• Scenario analyzed: coordinated reduction in military expenditures of 20 percent
• Core quantitative findings:
  • In developing countries the present value of consumption increases by 46 percent of 1992 GDP
  • Military expenditures cuts, in present value terms, equal 33 percent of 1992 GDP

Channels and interpretation of gains

• Mechanisms identified by the simulations:
  • Release of domestic resources due to lower military spending
  • Positive international economic externality driven by enhanced trade
  • Lower world interest rates contributing to welfare gains
• Comparative outcomes:
  • Net debtor developing country gains exceed those of industrial countries

Cross-country patterns

• Examination of individual developing country economies confirms:
  • The external trade effect is significant in determining both the pattern and the level of gains across developing countries

Policy-relevant implications (as presented)

• Coordinated reductions in military spending can:
  • Increase consumption in developing countries substantially relative to the fiscal cost measured in present value terms
  • Generate international spillovers via trade and global interest rates that benefit debtor developing countries more than industrial countries

Source: IMF Working Papers — "The Impact of Worldwide Military Spending Cutson Developing Countries", Steven A. Symansky, Tamim Bayoumi, Daniel P. Hewitt, November 1, 1993.