Defence spending and economic growth in South Africa: A supply and demand model

This paper provides a contribution to the growing corpus of knowledge and u nderstanding of the interaction between economic growth, and defence spendi ng in South Africa by specifying a Keynesian simultaneous equation model an d estimating the system for the period 1961 to 1997. The model contains a g rowth equation, a savings equation, a trade balance equation and a military burden equation and when estimated by single equation and systems estimati on methods is relatively well specified. There is evidence of an overall ne gative effect of military spending on the economy over this period, though the significance of individual coefficients is low. There is certainly no e vidence of any positive impact, suggesting that cuts in military spending d o present an opportunity for improved macroeconomic performance.