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The Influence of the State Debt on defense spending in Selected NATO States
Hodžic, Faris ; Izák, Vratislav (advisor) ; Ochrana, František (referee) ; Holcner, Vladan (referee)
The defense spending plays a significant role in the decision-making process of setting up a defense policy. The economy of a state, its performance and development rank among the main factors that influence the size of this public expenditure. At a time of economic stagnation in the Western European countries, the ongoing public debt crisis affects to a ever growing extent all areas of public spending, including the defense. This work aims to contribute to the current knowledge in the field of defense economy and public finance by investigating the influence of the state debt on defense spending. The first part of the work is dedicated to defining the economy of defense and providing a brief summary of its historical development, followed by a discussion of defense as a pure public good. This chapter analyzes the issue of public debt and explains how the major schools of economic theory approach this problem. The second part outlines the previous research in the field of defense spending and debt, their development and the potential relationship with macroeconomic variables. The third chapter presents and discusses the results of empirical research that is based on the theoretical assumptions and models introduced in the first two chapters. The analysis was performed on time series from the period of 1978 to 2011 (34 years) for seven NATO member states: Belgium, Denmark, France, Italy, Netherlands, UK and USA. The empirical analysis was performed by the statistical methods of regression and panel regression. The primary hypothesis on the existence of a relationship between the public debt and defense spending was confirmed and the partial hypothesis that this relationship is negative was refuted.
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