Measuring the effect of military spending on the fixed capital formation of the Kingdom of Saudi Arabia for the period 1980-2018

Abstract

The increase in the share of military expenditures to the gross domestic product of the Kingdom of Saudi Arabia during the past three decades has had negative effects on many economic and social variables, which have burdened its national economy with many burdens, represented in the decline of many economic and social indicators as a result of the lack of new investment opportunities, to show the effect of This directly affects the fixed capital formation, which burdened the Saudi economy with the burden of the opportunity cost. Accordingly, the research seeks to shed light on the reality of military spending in Saudi Arabia, focusing on the reasons and motives behind the increased spending based on the hypothesis that the increase in the share of military spending in the budget is due to the financial abundance derived from oil revenues. In the short and long run between military spending and the constant variable capital formation.
For the purpose of achieving the hypothesis of the research, it was relied on the co-integration methodology using the Autoregressive Distributed Lag cointegration technique (ARDL) to measure the effect of military spending on the fixed capital formation of the Kingdom of Saudi Arabia for the period (1980-2018), and the research came out with a set of conclusions, including proving the existence of Negative and moral effect between military spending and constant capital formation in the short and long run.
The research also found that the arms race that Saudi Arabia is waging has burdened the economy, especially in light of the state’s rentierism and its almost total dependence on oil revenues, which made it more vulnerable to shocks resulting from oil price fluctuations and economic and political transformations at the global level.