Defence partnerships, military expenditure, investment, and economic growth: an analysis in PESCO countries

This paper employs a panel vector autoregressive (PVAR) approach to investigate the relationship among military expenditure, investment, and economic growth, over the period after the enforcement of the Maastricht treaty (1994–2018) in 25 European countries that participate in the Permanent Structured Cooperation (PESCO). By using the Louvain community detection algorithm on the network links that have been established through defence partnerships in PESCO projects, two different country clusters emerge. Findings suggest that military expenditures can stimulate economic growth but the effects may not be common for all Member States, which might benefit from the involvement in joint defence projects to maximize the effectiveness of their defence spending.