Between Turkish Defense Industry and Economic Growth Analysis of Relationships

Abstract

The Turkish defense industry has achieved significant growth in recent years and has become an important actor in both meeting domestic demand and exports. The defense industry contributes to the Turkish economy through various channels in terms of technology development, foreign trade balance, employment and macroeconomic indicators. Turkey's defense industry has developed rapidly in recent years and has become one of the important components of the national economy. The sector, which was largely dependent on foreign sources in the early 2000s, has now reached a competitive position in the global defense market by increasing its localization rate to over 80%. In recent years, the export capacity of the defense industry has increased rapidly and Türkiye has become a strong supplier in the global market. Defense industry exports, which were 800 million dollars in 2010, reached 4.4 billion dollars in 2023, clearly demonstrating the sector's contribution to economic growth.

Today, the political and economic (in military terminology) center of power has shifted towards Eurasia. The 21st century will be the century of Asia. This region will have the "last word" with its underground and aboveground riches. If we think of the world as a seesaw, while Western states are falling, Eurasian countries are rising. The coming days will be the scene of this war in the world arena. In the coming period, there will be processes of balance of power formation and conflict. With the reflection of this on the economy, the footsteps of great chaos and serious crises will begin to be felt on a world scale. In this context, all kinds of R&D, innovation activities and nano-technological investments to be made for the creation and progress of a strong defense industry are very important and will be valuable in our ability to stand out strategically in the world.

In our study, Turkey's GNP, Economic Growth Rate, Defense Expenditures, Military Weapons Imports, Defense Industry to GNP Ratio data were used for the period covering the years 1960-2024. Unit Root Tests (ADF, P-P, KPSS), Granger Causality Test, VAR Causality (WALD) tests were used as tests. As a result of these analyses, the validity of Wagner and Keynesian Hypothesis was revealed. In other words, the principle that public expenditures and economic growth feed and increase each other emerged in our study. A bidirectional causality relationship has been found between defense industry expenditures and GNP, and it has been concluded that it affects and increases positively. In this context, Military Keynesian Approach, where defense expenditures increase economic growth, it has been determined that military arms imports have a negative effect on GNP (Economic Growth). When the Defense to GNP Ratio (logarithm taken) increases by one unit, it reduces GNP (logarithm taken) by 8.04. A one unit increase in the Economic Growth Rate (logarithm taken) increases GNP (logarithm taken) by 0.55. A one unit increase in Defense Industry Expenditures (logarithm taken) increases GNP (logarithm taken) by 48.29. A one unit increase in Military Weapons Imports (logarithm taken) reduces GNP (logarithm taken) by 0.05. Again, there is a causal relationship from Military Weapons imports to GNP. A causal relationship has been determined between the economic growth rate and the Amount of Defense Expenditures. A unidirectional causality relationship was found from the economic growth rate to Military Weapons Imports.