DEFENSE EXPENDITURES AND EXTERNAL DEBT: EVIDENCE FROM PAKISTAN AND INDIA

Defense expenditures and external debt is an area that is less focused in the defense economics literature. This study has explored the defense-debt nexus for the two rival neighboring countries, i.e. Pakistan and India. We have used the time series data for the period of 1972 to 2010. The methodology employed for the study is Autoregressive Distributed Lag ARDL. Dunne (2003) defense-debt model has been used to probe the impacts of defense expenditures on external debt in both the countries. The findings of the study suggest that defense spending has escalated external debt in both the countries. The study suggests that both the countries must reduce their defense expenditures as these are contributing to their external debt accumulation. So, both the countries should lessen their defense spending to get the sovereignty and selfesteem in the world.