Military Spending, International Trade and Economic Growth in the Mediterranean Basin

In this paper, I argue that a peaceful environment can be created by opening up the trade between the countries of the Mediterranean basin, preferably by bilateral and multilateral agreements like the ones which established the European Union and the Eurozone. Data on military spending, trade and Gross Domestic Product (GDP) of 20 Mediterranean countries are used in a simple descriptive analysis to identify the relation between military spending and international trade, and military spending and economic growth. The descriptive evidence shows that military spending differs considerably between the twenty Mediterranean countries examined in this study. There is a negative relation between international trade and military spending. Tests show that the causality runs from trade to military spending. Military spending does not seem to have an effect on economic growth.