The aim of this study is to discuss nexus between defense spending and certain economic variables in Lithuania during 2009–2018. Considering the fact that there are no universal analytical tools for measuring defense expenditure nexus with economic growth, in this study, data comparison and correlation analyses are conducted with key economic variables being interpreted. Increased defense spending, successful reforms in the Armed Forces, and NATO/EU activities contributed to the security of Lithuania and provided positive stimulus for the national economy. The term security fluctuate factor, describing the yearly security investment responsiveness effect on the state economy, is offered in the study for the first time. The main results support nexus findings between defense spending and economic growth as they indicate positive correlation between distinctive state economic variables and extensive defense spending in Lithuania, especially in the post-2014 period.
Aizenman, Joshua and Reuven Glick (2006) “Military expenditure, threats, and growth”. Journal of International Trade & Economic Development 15, 2, 129–155.
https://doi.org/10.1080/09638190600689095
Alexander, W. Robert J. (1990) “The impact of defence spending on economic growth: a multi-sectoral approach to defence spending and economic growth with evidence from developed economies”. Defence and Peace Economics 2, 1, 39–55.
https://doi.org/10.1080/10430719008404677
Araujo, Junior Ari Francisco de, and Cláudio D. Shikida (2008) “Military expenditures, external threats and economic growth”. Economics Bulletin 15, 16, 1–7.
Arshad, Amna, Shabib Haider Syed, and Ghulam Shabbir (2017) “Military expenditure and economic growth: a panel data analysis”. Forman Journal of Economic Studies 13.
https://doi.org/10.32368/FJES.20170008
Atesoglu, H. Sonmez (2002) “Defense spending promotes aggregate output in the United States – evidence from cointegration analysis”. Defence and Peace Economics 13, 1, 55–60.
https://doi.org/10.1080/10242690210963
Atesoglu, H. Sonmez (2009) “Defense spending and aggregate output in the United States”. Defence and Peace Economics 20, 1, 21–26.
https://doi.org/10.1080/10242690701775533
Ayyoub, Muhammad, Imran Sharif Chaudhry, and Fatima Farooq (2011) “Does inflation affect economic growth? The case of Pakistan”. Pakistan Journal of Social Sciences 31, 1, 51–64.
Ball, Nicole (1983) “Military expenditure, economic growth and socio-economic development in the third world”. Nordic Journal of Latin American Studies22, 1-2, 5–20.
https://doi.org/10.16993/iberoamericana.307
BoL (Bank of Lithuania) (2019) “Inward foreign direct investment by country”. Available online at
https://www.lb.lt/en/inward-foreign-direct-investment-by-country-1
Accessed on November 11, 2020.
Benoit, Emile (1973) Defense and economic growth in developing countries. Lexington: Lexington books.
Benoit, Emile (1978) “Growth and defense in developing countries”. Economic Development and Cultural Change 26, 2, 271–280.
https://doi.org/10.1086/451015
Biswas, Basudeb and Rati Ram (1986) “Military expenditures and economic growth in less developed countries: an augmented model and further evidence”. Economic Development and Cultural Change 34, 2, 361–372.
https://doi.org/10.1086/451533
Blomström, Magnus, Ari Kokko, and Jean-Louis Mucchielli (2003) “The economics of foreign direct investment incentives”. In Heinz Herrmann, and Robert Lipsey, eds. Foreign direct investment in the real and financial sector of industrial countries, 37–60. Heidelberg: Springer.
https://doi.org/10.1007/978-3-540-24736-4_3
Callen, Tim (2008) “What is gross domestic product”. Finance & Development 45, 4, 48-49
d’Agostino, Giorgio, J. Paul Dunne, and Luca Pieroni (2012) “Assessing the effects of military expenditure on growth”. In Michelle R. Garfinkel and Stergios Skaperdas, eds. Oxford handbook of the economics of peace and conflict, 388–411.
https://doi.org/10.1093/oxfordhb/9780195392777.013.0017
d’Agostino, Giorgio, J. Paul Dunne, and Luca Pieroni (2017) “Does military spending matter for long-run growth?”. Defence and Peace Economics 28, 4, 429–436.
https://doi.org/10.1080/10242694.2017.1324723
d’Agostino, Giorgio, J. Paul Dunne, and Luca Pieroni (2019) “Military expenditure, endogeneity and economic growth”. Defence and Peace Economics 30, 5, 509–524.
https://doi.org/10.1080/10242694.2017.1422314
Dash, Devi Prasad, Debi Prasad Bal´, and Manoranjan Sahoo (2016) “Nexus between defense expenditure and economic growth in BRIC economies: an empirical investigation”. MPRA paper. Available online at
Deger, Saadet (1986) “Economic development and defense expenditure”. Economic Development and Cultural Change 35, 1, 179–196.
https://doi.org/10.1086/451577
Dudzeviciute, Gitana, Valentina Peleckiene, and Kestutis Peleckis (2016) “Overview of defence expenditure trends: evidence from the Baltic states”. Proceedings of the 2016 International Conference “Economic Science for Rural Development” Conference Proceedings 43, 33–38. Jelgava, LLU ESAF, 21–22 April 2016.
Dunne, J. Paul, Ron P. Smith, and Dirk Willenbockel (2005) “Models of military expenditure and growth: a critical review”. Defence and Peace Economics 16, 6, 449–461.
https://doi.org/10.1080/10242690500167791
Dunne, J. Paul and Nan Tian (2015) “Military expenditure, economic growth and heterogeneity”. Defence and Peace Economics 26, 1, 15–31.
https://doi.org/10.1080/10242694.2013.848575
Dunne, J. Paul (2012) “Military spending, growth, development and conflict”. Defence and Peace Economics 23, 6, 549–557.
https://doi.org/10.1080/10242694.2012.663576
Dunne, John Paul and Eftychia Nikolaidou (2012) “Defence spending and economic growth in the EU15”. Defence and Peace Economics 23, 6, 537–548.
https://doi.org/10.1080/10242694.2012.663575
Eurostat (2019) GDP and main components (output, expenditure and income). Available online at
http://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=nama_10_gdp&lang=en
Accessed on November 11, 2020.
Grobar, Lisa M. and Richard C. Porter (1989) “Benoit revisited: defense spending and economic growth in LDCs”. Journal of Conflict Resolution 33, 2, 318–345.
https://doi.org/10.1177/0022002789033002007
Invest Lithuania (2019) We speak fluent business. Available online at
https://investlithuania.com/wp-content/uploads/2017/09/Invest-Lithuania-general-presentation.pdf
Accessed on November 11, 2020.
Jokubauskas, Vytautas (2018) “Territorial defence and partisan resistance (Lithuania’s experience)”. Lithuanian Annual Strategic Review 16, 1, 331–371.
https://doi.org/10.2478/lasr-2018-0012
Jopling, Lord (2018) Countering Russia’s hybrid threats: an update. NATO Parliamentary Assembly.
Kharlamova, Ganna (2014) “Investment security of industries: rating assessment (case of Ukraine)”. Procedia Economics and Finance 16, 657–668.
https://doi.org/10.1016/S2212-5671(14)00854-5
Landau, Daniel L (1993) The economic impact of military expenditures. World Bank Publications.
Lietuvos kariuomenė (2018) Logistikos batalionas. Available online at
https://kariuomene.kam.lt/lt/kariuomenes_struktura/sausumos_pajegos/padaliniai/mpbgv/padaliniai_161/logistikos_batalionas.html
Accessed on November 11, 2020.
MoD (Ministry of National Defence of the Republic of Lithuania) (2018) Lithuania’s initiative of cyber rapid response force formation greenlighted in Brussels. Available online at
https://kam.lt/en/news_1098/current_issues/lithuanias_initiative_of_cyber_rapid_response_force_formation_greenlighted_in_brussels.html
Accessed on November 11, 2020.
MoD (2017) The white paper on Lithuanian defence policy. Available online at
https://kam.lt/download/59163/wp-2017-en-el.pdf
Accessed on November 11, 2020.
MoD (2019a) Skaičiai ir faktai. Available online at
http://kam.lt/lt/personalo_politika_512/skaiciai_ir_faktai_537.html
Accessed on November 11, 2020.
MoD (2019b) Žinių archyvas 2019 metai. Available online at
http://kam.lt/lt/naujienos_874/archyvas_930/ziniu_archyvas_2019_metai.html
Accessed on November 11, 2020.
NATO PDD (Public Diplomacy Division) (2017) Defence expenditure of NATO countries (2009-2016). Available online at
https://www.nato.int/nato_static_fl2014/assets/pdf/pdf_2017_03/20170313_170313-pr2017-045.pdf
Accessed on November 11, 2020.
NATO PDD (2019) Defence expenditure of NATO countries (2011–2018). Available online at
https://www.nato.int/nato_static_fl2014/assets/pdf/pdf_2019_03/190314-pr2018-34-eng.pdf
Accessed on November 11, 2020.
OSP (Official Statistics Portal) (2019) Main Lithuanian indicators. Available online at
https://osp.stat.gov.lt/pagrindiniai-salies-rodikliai
Accessed on November 11, 2020.
Ram, Rati (1995) “Defense expenditure and economic growth”. In Keith Hartley and Todd Sandler, eds. Handbook of Defense Economics 1, 251–274. North-Holland.
https://doi.org/10.1016/S1574-0013(05)80012-2
Raza, Syed Ali, Muhammad Shahbaz and Sudharshan Reddy Paramati (2017) “Dynamics of military expenditure and income inequality in Pakistan”. Social Indicators Research 131, 3, 1035–1055.
https://doi.org/10.1007/s11205-016-1284-7
Sandler, Todd and Keith Hartley, eds. (2007) Handbook of defense economics: defense in a globalized world. Vol 2. North-Holland.
Scheetz, Thomas (2002) “Military expenditure and development in Latin America”. In J. Brauer and P. Dunne, eds. Arming the South, 51–71. Springer.
https://doi.org/10.1057/9780230501256_4
Seimas of the Republic of Lithuania (2017) National security strategy. Available online at
https://kam.lt/download/57457/2017-nacsaugstrategijaen.pdf
Accessed on November 11, 2020.
Shahbaz, Muhammad, Talat Afza, and Muhammad Shahbaz Shabbir (2013) “Does defence spending impede economic growth? Cointegration and causality analysis for Pakistan”. Defence and Peace Economics 24, 2, 105–120.
https://doi.org/10.1080/10242694.2012.723159
Simionescu, Mihaela (2018) “What drives economic growth in some CEE countries?”. Studia Universitatis „Vasile Goldis” Arad – Economics Series 28, 1, 46–56.
https://doi.org/10.2478/sues-2018-0004
Sytas, Andrius (2018) Lithuania commits to spending 2.5 pct of GDP on defence by 2030. Available online at
https://www.reuters.com/article/lithuania-defence/lithuania-commits-to-spending-2-5-pct-of-gdp-on-defence-by-2030-idUSL5N1VW1G2
Accessed on November 11, 2020.
Westing, Arthur H. (1978) “Military expenditures and their reduction”. Bulletin of Peace Proposals 9, 1, 24–29.
https://doi.org/10.1177/096701067800900104
Yakovlev, Pavel (2007) “Arms trade, military spending, and economic growth”. Defence and Peace Economics 18, 4, 317–338.
https://doi.org/10.1080/10242690601099679
Yildirim, Jülide, Selami Sezgin, and Nadir Öcal (2005) “Military expenditure and economic growth in Middle Eastern countries: a dynamic panel data analysis”. Defence and Peace Economics 16, 4, 283–295.
https://doi.org/10.1080/10242690500114751
Yolcu Karadam, Duygu, Jülide Yildirim, and Nadir Öcal (2017) “Military expenditure and economic growth in Middle Eastern countries and Turkey: a non-linear panel data approach”. Defence and Peace Economics 28, 6, 719–730.
https://doi.org/10.1080/10242694.2016.1195573
