Empirical Economic Bulletin, An Undergraduate Journal


This paper addresses whether or not the United States’ government’s choice to cut defense spending is going to have a negative impact on economic growth, and therefore slow down the US recovery. This paper analyzes the findings during the last 70 years regarding defense spending and its effect on economic growth, through comparing that relationship between studies under various circumstances. It then goes into detail of the most recent data from the United States to see if there is a casual relationship between defense spending and economic growth. This paper will use the Granger Causality Method to test the significance and usefulness of one time series forecasting another. The paper concludes that there is no Granger-causality between the economic growth and defense spending. Therefore it is not possible to use one data series to predict another.