Investigating the Symmetric and Asymmetric Causality between Global Geopolitical Risk, Crude Oil Price and Middle East Region's Defense Expenditures

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Article Type:
Research/Original Article (دارای رتبه معتبر)
Abstract:

The main purpose of this study is to investigate the symmetric and asymmetric causality relationship between three variables of global geopolitical risk index, crude oil price and Middle East region's defense expenditures during the years 1988-2021. For this purpose, the Granger causality test of Hatemi-J (2012) has been used in the form of bivariate analysis. The results of the symmetric causality test between the variables show that only the existence of a one-way causality relationship is confirmed from the side of crude oil price to the Middle East region's defense expenditures. The results of the asymmetric causality test also confirm the one-way causality relationship from the positive shocks of the global geopolitical risk index and the crude oil price to the positive shocks of Middle East region's defense expenditures. Also, the one-way asymmetric causality is confirmed from the side of negative crude oil price shocks to the negative shocks of Middle East region's defense expenditures and from the side of positive global geopolitical risk index shocks to positive crude oil price shocks. Based on this, it can be said that an increase in the global geopolitical risk leads to an increase in the crude oil price. The increase in the global geopolitical risk and the crude oil price also leads to an increase in defense spending in the Middle East region. Also, it can be expected that with the decrease in the crude oil price, the defense expenditures in the Middle East region will decrease.

Language:
Persian
Published:
Middle East Studies Quarterly, Volume:30 Issue: 2, 2023
Page:
7
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