The effects of military expenditures on Turkish economy : a general equilibrium model analysis

Abstract

The purpose of this thesis is to investigate the effects of military expenditures over the period of 1980-2000, in Turkey. The analysis is conducted by the aid of computable general equilibrium model borrowed from Yeldan. Extending the model so as to include the military expenditures, major impacts of military spending on the macro economic variables of Turkey are tried to be observed. The model examines the effects of military expenditures under two main headings: (i) impact of military expenditures when expenditures are cut to the 3% GDP share assuming Turkey followed NATO’s military expenditure policy after 1988 (ii) impact of military expenditures due to the increasing volume of conflict and armament expenditures coming with it, pushing the level of expenditures to 7% GDP share. The model suggests substantial economic effects which are in opposite direction with the military expenditures. Especially, in government savings and investment, significant contradiction is observed. Other macro economic variables such as GDP, disposable income, exports and imports are in accordance with the movement in savings and investment.