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THE WAR MACHINE & GDP Presentation by: David Gomez

THE WAR MACHINE & GDP Presentation by: David Gomez. PURPOSE. The purpose of this presentation is to see if military conflicts create a boost in real GDP. HYPOTHESIS.

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THE WAR MACHINE & GDP Presentation by: David Gomez

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  1. THE WAR MACHINE & GDPPresentation by: David Gomez

  2. PURPOSE • The purpose of this presentation is to see if military conflicts create a boost in real GDP.

  3. HYPOTHESIS • Using the GDP model: GDP = C + I + G + NX, where C = expenditures on consumption, I = investment expenditure, G = government expenditure, NX = net exports • I expect that since the government must increase expenditure to fund military operations, that in fact, military conflicts will increase real GDP.

  4. REGRESSION VARIABLES • Real GDP is my dependent variable • GOVT Military Expenditures is an exp. variable which shows the total spending on the military per year. • Active Military Personnel is an exp. variable showing the total amount of active duty military per year. • DOD Civilian Personnel is an exp. variable showing total amount of civilian personnel that work for the Department of Defense.

  5. REGRESSION VARIABLES • Personal Consumption is an exp. variable for annual consumption. • Gross Investment is an exp. variable for annual investment expenditure

  6. REGRESSION DUMMY VARIABLES • Six Dummy Variables are utilized in my regression analysis to take a snapshot in time of specific conflicts. • Each Dummy Variable corresponds with a specific military conflict as follows: Cold War (1953-1962), Vietnam Conflict (1959-1975), Gulf War (1990-1991), Bosnian Conflict (1994-1995), and War on Terrorism (2001-present).

  7. UNRESTRICTED RESULTS

  8. RESTRICTED RESULTS

  9. AUTO-CORRELATION? Auto-correlation performed on the unrestricted regression results: Durbin-Watson Statistic: 1.43469985 N=56, K’=9 dL = 1.057 dU = 1.785 Falls within the Zone of Indecision Coefficient of autocorrelation = 0.28265 (No correlation)

  10. CONCLUSION • Military Expenditures do in fact increase GDP, but the effect on GDP is not the same for every military conflict. • GDP = 465880000000.00 + 1.599GovtExp – 551573.98DODCiv + 1.17Cons + 0.9414GrossInv – 154564000000.00Cold + 57679029132Viet – 230386000000.00Gulf – 33593078401Bosnia – 126171000000.00WOT

  11. SOURCES • National Bureau of Economic Research • Department of Defense

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