ANALYSIS OF DEFENSE EXPENDITURES OF EUROPEAN STATES
Abstract
The military-political situation in the world has always influenced the economic policy of states. Including defense spending. However, for most countries of the world and Europe, the development and strengthening of the armed forces is not a priority. Most of them, quite logically, are developing the social sphere into economic institutions. However, in recent years, armed conflicts have continued in the world and in Eastern Europe. Therefore, the article focuses on the study of the impact of defense spending on the defense of other states as exogenous factors on the defense spending of individual countries as an endogenous factor. Despite the significant relevance of this issue, there is a need to analyze the elements that affect the defense spending of states. Based on the study, we can formulate a number of conclusions about their relationship. The aim of the study is to use econometric models, in particular vector autoregressions, to reveal the essence of impulse shocks from the spending of neighboring states. This study analyzed the dynamics and dispersion of defense spending in European states over the past twenty years. Data analysis showed the impact of political events and armed conflicts on the growth of defense spending. To determine the impact of defense spending on neighboring states, we used vector autoregressive models. Impulse response functions are constructed that characterize the reaction of the dynamic series in response to certain external shocks. Moreover, shock in this case means a momentary change in exogenous factors. This function characterizes the time of return of the endogenous variable to the equilibrium trajectory when exposed to an exogenous shock. Summing up the results obtained, we note that a significant degree of dependence on external factors for Ukraine can be explained by the excessive openness of the Ukrainian economy and dependence on external states and many economic levers. exposure to external negative impulses. Further research can expand our proposed approach by introducing new factors that can reflect the structural relationships of different areas of public spending for states.
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