Military Spending and the Sino-US Arms Race: An Analysis Using Bootstrap ARDL

Abstract

This paper used the newest bootstrap ARDL model to explore a Sino-US arms race and the correlation between military spending and gross debt between China and the United States covering the period from 1995 to 2016. The results showed that military spending positively affected gross debt, while gross debt negatively affected military spending in China and the United States. Furthermore, from the Chinese point of view, when China’s economy was prospering, a Sino-US arms race took place by separately using interest rates and gross debt of China and the US as control variables to explore the Sino-US arms race. If logically speaking, there had been a Chinese economic recession, military spending would have been crowded out, and the Sino-US arms race may not have happened. From the perspective of the US, the US is threatened by China's rapid economic growth which triggers the United States to initiate a Sino-US arms competition.