THE INFLUENCE OF OIL PRICE FLUCTUATIONS AND MACROECONOMIC CONSEQUENCES ON DEFENSE EXPENDITURE IN AFRICAN OIL-RICH COUNTRIES

Abstract

This study aims to examine the cointegration and causality between oil price fluctuations and macroeconomic consequences on military expenditure in countries that have a lot of oil resources. Heterogeneous panel estimates and data from 1980 to 2022 were included in the study. Empirical evidence suggests that real oil prices have a significant and positive impact on military expenditure in the long run, and there is a causal relationship between them. The empirical evidence shows that real oil prices have a positive impact on the long-term military expenditure in African oil-exporting countries. The SLM test revealed that the military spending of these oil-exporting nations has a U-shaped pattern, indicating that GDP plays a major role in their military spending over time. Policymakers should prioritize using oil revenues for healthcare, education, and infrastructure instead of spending excessively on defense industries. This study is aimed at bridging the knowledge gap by examining the impact of oil prices on the military budgets of these nations.