Military Spending and Economic Stability in BRICS+ and G7 Countries

This paper investigates the economic and geopolitical implications of military spending across two major global blocs: BRICS+ and the G7. While G7 countries exhibit stable, institutionally anchored defense budgets, BRICS+ nations have recently experienced a rapid increase in military expenditures per GDP, driven by economic growth, trade surpluses, and aspirations for greater global influence. Using advanced panel econometric methods, including Two-Stage Least Squares (2SLS), Cross-Sectionally Augmented ARDL (CS-ARDL), and Pooled Mean Group (PMG) estimators, the study analyzes the macroeconomic drivers of military spending, fiscal trade-offs, and strategic consequences in both blocs. Results show that GDP is the dominant and most consistent determinant of defense spending. G7 countries display strong long-run elasticity but low short-run responsiveness, potentially reflecting institutional inertia. In contrast, BRICS+ defense budgets are more responsive to economic and fiscal fluctuations yet show weaker long-run stability. Inflation, fiscal balance, and external accounts exhibit heterogeneous effects. The findings reveal how developmental stages influence the balance between military ambitions and economic priorities.