The economic effects of military expenditure on sovereign debt in Greece

This paper applies the autoregressive model to investigate the effects of defence spending on sovereign debt in Greece over the period 1948-2008. Our empirical finding of the stronger effect implies that high military spending is a primary cause of debt growth in Greece. The high military spending is a strategy game which signals strong defence in order to deter war for keeping peace in the region. That signalling strategy for peace has been successful but at a high price which leaves Greece with a huge stock of debt that attributes to the current debt crisis.