TY - JOUR
T1 - Defense Budget Growth and Inflation
T2 - A Wavelet-Based Study of the U.S. and Britain
AU - Wang, Yu
N1 - Funding Information:
The author(s) disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: Xi’an Jiaotong-Liverpool University provides the financial support for the open-access publication of this article.
Publisher Copyright:
© The Author(s) 2022.
PY - 2022/1/9
Y1 - 2022/1/9
N2 - Despite the extensive theoretical connections between defense budget growth and inflation, empirical findings based on traditional time-domain methods have been inconclusive. This study reexamines the issue from a time–frequency perspective. Applying continuous wavelet analysis to the U.S. and Britain, it shows empirical evidence in support of positive bilateral effects in both cases. In the bivariate context, U.S. defense budget growth promoted inflation at 2- to 4-year cycles in the 1840s and at 8- to 24-year cycles between 1825 and 1940. Conversely, inflation accelerated defense spending growth at 5- to 7-year cycles in the 1830s and at 25- to 64-year cycles between 1825 and 1940. Similarly, British defense budget growth spurred inflation at 8- to 48-year cycles between 1890 and 1940 and at 50- to 65-year cycles between 1790 and 1860. Inflation fueled the growth of defense spending at 7- to 20-year cycles between 1840 and 1870, in the 1940s, and in the 1980s. Preliminary results from multivariate analyses are also supportive, though there is a need for further research that is contingent on advancements in the wavelet method in the direction of simulation-based significance tests.
AB - Despite the extensive theoretical connections between defense budget growth and inflation, empirical findings based on traditional time-domain methods have been inconclusive. This study reexamines the issue from a time–frequency perspective. Applying continuous wavelet analysis to the U.S. and Britain, it shows empirical evidence in support of positive bilateral effects in both cases. In the bivariate context, U.S. defense budget growth promoted inflation at 2- to 4-year cycles in the 1840s and at 8- to 24-year cycles between 1825 and 1940. Conversely, inflation accelerated defense spending growth at 5- to 7-year cycles in the 1830s and at 25- to 64-year cycles between 1825 and 1940. Similarly, British defense budget growth spurred inflation at 8- to 48-year cycles between 1890 and 1940 and at 50- to 65-year cycles between 1790 and 1860. Inflation fueled the growth of defense spending at 7- to 20-year cycles between 1840 and 1870, in the 1940s, and in the 1980s. Preliminary results from multivariate analyses are also supportive, though there is a need for further research that is contingent on advancements in the wavelet method in the direction of simulation-based significance tests.
KW - Britain
KW - United States
KW - defense spending
KW - inflation
KW - time series
UR - http://www.scopus.com/inward/record.url?scp=85122724454&partnerID=8YFLogxK
U2 - 10.1177/14789299211068407
DO - 10.1177/14789299211068407
M3 - Article
AN - SCOPUS:85122724454
SN - 1478-9299
VL - 21
SP - 260
EP - 284
JO - Political Studies Review
JF - Political Studies Review
IS - 2
ER -