Defense spending and investment in the United States

Effects of defense spending on investment in the United States are examined. Findings reveal that there is a positive cointegration relation between defense spending and investment. Findings do not indicate a tradeoff between defense spending and investment. Nondefense government spending has a greater positive effect on investment compared to defense spending. The results suggest that the anticipated rise in defense spending during the first decade of the twenty-first century should promote investment and thereby enhance capital accumulation and economic growth.