A1310
Title: Indo-Pakistani arms race dynamics: A structural VAR perspective
Authors: Lennart Empting - University of Duisburg-Essen (Germany)
Helmut Herwartz - Georg-August-University Goettingen (Germany)
Hui Ma - Georg-August-University Goettingen (Germany) [presenting]
Simon Albert Kuehn - Georg-August-University Goettingen (Germany)
Abstract: The longstanding rivalry between India and Pakistan is regarded as a classic case of arms race dynamics, commonly analyzed with vector autoregressive (VAR) models. Previous studies often rely on Granger causality tests from reduced-form estimates to infer the direction of military buildup. Structural vector autoregressive (SVAR) models are applied to examine the effects of independent structural shocks on the military burdens of India and Pakistan from 1956 to 2022. Employing independent component analysis for data-driven identification, country-specific shocks are isolated, and their respective impacts are assessed both domestically and across borders. Findings reveal a marked asymmetry. India's military burden responds almost exclusively to its own domestic shocks, while Pakistan's military expenditure is shaped by both its own shocks and lagged responses to Indian shocks, indicating a one-sided arms race dynamic. Notably, although the immediate impact of Indian shocks on Pakistan is not statistically significant, substantial reactive effects, consistent with the Richardson models action-reaction mechanism, develop over time.
