The Determinants of Military Expenditure in Asia and Oceania, 1992-2016: A Dynamic Panel Analysis

Using a dynamic panel approach, this article examines the determinants of military expenditures for 29 Asian and Oceanian countries during 1992-2016. A two-step difference-GMM estimator is applied. Both the impact of Chinese and US military expenditure on sample countries' military budgets are considered. Results show that sample countries do not respond to Chinese military expenditure; however, these countries respond to US military expenditure. Moreover, lagged military expenditure, GDP, population, and trade openness are important determinants of military spending, while wars and regime type are not. ©2018 Walter de Gruyter GmbH, Berlin/Boston 2018.