Saturday, 31 March 2012: 9:10 AM
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.