Dynamic panel and nonlinear causality analytics of defense and debt in fragile Africa
DOI:
https://doi.org/10.31181/jdaic10009072025aKeywords:
dynamic panel, Granger-causality, modeling fiscal-debt trap, sovereign debt, system-GMMAbstract
This research integrates several analytical models to examine how rising military spending in fragile African states relates to external indebtedness between 2000 and 2023. A combination of dynamic panel methods—including System-GMM to address endogeneity, Prais-Winsten regression to correct for serial correlation, and panel Granger causality tests—is employed to develop a robust framework for exploring the fiscal-security nexus. The findings reveal a significant nonlinear dynamic: while moderate military spending appears fiscally neutral, surpassing a critical threshold transforms it into a major driver of debt accumulation. Beyond the effects of scale, increased defense spending alone does not reliably reduce conflict. Instead, strong governance, effective regulation, and sustained economic growth emerge as the most decisive factors in building lasting peace. The analysis also identifies a self-reinforcing feedback loop—a “fiscal–security trap”—in which rising debt and defense expenditures mutually reinforce one another over time. By advancing dynamic modeling of fiscal risks in fragile contexts, this research contributes to the broader objective of promoting sustainable debt management and durable peace.
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