ABSTRACT

Different approaches and findings are encountered in the literature both in the theoretic field and the results of the empirical studies regarding the effects of the defense expenditures which is a branch of public expenditures on the basic macroeconomic indicators. In this study, the causality relationship between the defense expenditures and GDP, employment and import indicators are reviewed in Turkey where both internal and the external security has an important significance because of the geo-strategic location.

In this context, while the bilateral causality is encountered between the defense expenditures and the employment in the study made where first Granger causality test is conducted; as the result of the analysis carried out to causality with the Toda-Yamamoto approach the causality relation is determined from the employment to the defense expenditures and from the defense expenditures to the GDP.