Abstract
The spate of political instability in the West African sub-region has triggered a lull in socio-economic activities and consequently the government in the sub-region has responded by increasing spending on defense in order to restore socio-economic stability. This study examines the relationship between defense spending and economic growth in the ECOWAS sub-region using a panel of thirteen (13) countries for the period (2000-2014). The study
adopts a panel data framework and specifies the fixed and random effect models. The Hausman test is utilized to determine the appropriateness of the fixed effect model. Using non-stationary panel data which became stationary at first difference, the panel Fully Modified Least Squares (FMOLS) was utilized to estimate the model. The study reveals that defense spending induces a negative effect on economic growth; this would not be unconnected with crowding out of private sector investment, high cost of the importation of military hardware and the huge amount spent on maintaining the military as well as the weak fiscal discipline in the economies of the sub-region. It is recommended that government institutions be strengthened to ensure realistic, transparent and appropriate channeling of defense spending towards productive economic activities.
Keywords: Defense Spending, Gross Domestic Product, Government Expenditure, Panel Fully Modified Ordinary Least Square (PFMOLS).