The Dynamics of Political Stability and Military Expenditure on Economic Growth: Insights from Tanzania

Abstract

This study investigates the relationship between political stability, military expenditure, and economic growth in Tanzania, from 2002 to 2022. The study uses the ARDL model due to its ability to handle variables with different orders of integration, its flexibility in capturing dynamic relationships, and its robustness in providing insights into both short-term and long-term interactions among variables. The ARDL bounds test has revealed the existence of cointegration, suggesting the presence of long-run relationships among variables. Moreover, the empirical results show that past GDP is positively related to current economic growth, while the effect of voice and accountability on economic growth remains statistically insignificant. Further, the effects of regulatory quality and the rule of law on economic growth exhibit mixed effects. Also, the individual effects of political stability and military expenditure on the economy remain positive and statistically significant. However, the interaction of political stability and military spending is negatively related with the current economic growth but positively correlated with economic growth in the long run. These findings underscore the imperative of political stability and strategic military expenditure as critical ingredients in generating sustainable economic growth in Tanzania.