Causality between Defence Spending and Economic Growth: The Case of Mainland China

Using cointegration and Granger causality tests, examines the causal relationship between defence spending and economic growth in mainland China over the period 1950‐1991. The results show that defence spending is not cointegrated with the real economic growth rate, implying the lack of any long‐run equilibrium relationship between the two variables. In addition, Granger causality tests indicate causal independence between the two variables.