Geopolitical risk and military expenditures: Evidence from the US economy

Exploring the nexus between geopolitical risk (GPR) and military expenditures (ME) has been limited during past period. It is justified by absence of a well-published proxy for GPR. Recently, work Caldara Iacoviello (2022) stimulated scholars to examine consequences Our paper seeks understand relationship GPR ME in United States (US). designs theoretical framework computes an econometric model using Autoregressive Distributed Lag methodology based on annual data (1960–2021). In addition, it uses pairwise Toda–Yamamoto causality test. The results show that one unidirectional runs from US. Further, this statistically significant positive short long run. This finding supports our hypothesis USGPR consequence resource allocation, i.e., ME, can be controlled, directed, mitigated. Thus, tool achieve US international hegemony’s strategic goals. From policy implication perspective, proved broad negative various economies. moving toward cooperation coordination with other nations instead accumulating tends support economy.