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THE WAR MACHINE & GDP Presentation by: David Gomez.

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1 THE WAR MACHINE & GDP Presentation by: David Gomez

2 PURPOSE The purpose of this presentation is to see if military conflicts create a boost in real GDP.

3 HYPOTHESIS Using the GDP model: GDP = C + I + G + NX, where C = expenditures on consumption, I = investment expenditure, G = government expenditure, NX = net exports I expect that since the government must increase expenditure to fund military operations, that in fact, military conflicts will increase real GDP.

4 REGRESSION VARIABLES Real GDP is my dependent variable GOVT Military Expenditures is an exp. variable which shows the total spending on the military per year. Active Military Personnel is an exp. variable showing the total amount of active duty military per year. DOD Civilian Personnel is an exp. variable showing total amount of civilian personnel that work for the Department of Defense.

5 REGRESSION VARIABLES Personal Consumption is an exp. variable for annual consumption. Gross Investment is an exp. variable for annual investment expenditure

6 REGRESSION DUMMY VARIABLES Six Dummy Variables are utilized in my regression analysis to take a snapshot in time of specific conflicts. Each Dummy Variable corresponds with a specific military conflict as follows: Cold War (1953-1962), Vietnam Conflict (1959-1975), Gulf War (1990-1991), Bosnian Conflict (1994- 1995), and War on Terrorism (2001-present).

7 UNRESTRICTED RESULTS Regression Statistics Multiple R0.999598951 R Square0.999198062 Adjusted R Square0.999015803 Standard Error98260960895 Observations55 FSignificance F 5482.3076991.15986E-64 Coefficientst StatP-value Intercept513094206142.331.2326483360.224252822 Govt Military Expenditures (Base YR$ 2007)1.6730670674.0884034320.000181617 Active Military Personnel38544.56450.579788120.565014706 DOD Civilian Personnel-712229.8236-1.7771396160.082458408 Personal Consumption (Base YR$ 2007)1.16180549525.819250323.24157E-28 Gross Investment (Base YR$ 2007)0.962239045.1525370935.8169E-06 Cold War-164074811029.41-2.0405137360.047327915 Vietnam Conflict420735420470.9106705210.367431157 Gulf War-220593797982.34-2.7980459960.007600762 Bosnia Conflict-30594347308-0.3971641870.693166469 War on Terrorism-141275120333.43-1.4001820370.168471057

8 RESTRICTED RESULTS Regression Statistics Multiple R0.999595886 R Square0.999191935 Adjusted R Square0.999030322 Standard Error97533488877 Observations55 FSignificance F 6182.6224831.68681E-66 Coefficientst StatP-value Intercept465879897783.951.1497870250.256305708 Govt Military Expenditures (Base YR$ 2007)1.5588604324.3783379177.04774E-05 DOD Civilian Personnel-551573.9801-1.919157350.061319603 Personal Consumption (Base YR$ 2007)1.1700888827.626777197.28544E-30 Gross Investment (Base YR$ 2007)0.9414362015.1751578725.12297E-06 Cold War-154563845588.17-1.9781716860.054051291 Vietnam Conflict576790291321.5474987830.12874773 Gulf War-230385773421.97-3.0140149460.004224662 Bosnia Conflict-33593078401-0.4403389210.661799645 War on Terrorism-126171009762.07-1.3040269290.198855614

9 AUTO-CORRELATION? Auto-correlation performed on the unrestricted regression results: Durbin-Watson Statistic: 1.43469985 N=56, K’=9 dL = 1.057 dU = 1.785 Falls within the Zone of Indecision Coefficient of autocorrelation = 0.28265 (No correlation)

10 CONCLUSION Military Expenditures do in fact increase GDP, but the effect on GDP is not the same for every military conflict. GDP = 465880000000.00 + 1.599GovtExp – 551573.98DODCiv + 1.17Cons + 0.9414GrossInv – 154564000000.00Cold + 57679029132Viet – 230386000000.00Gulf – 33593078401Bosnia – 126171000000.00WOT

11 SOURCES National Bureau of Economic Research Department of Defense

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