Following Dunne and Smith (1990) "Military Spending and Unemployment in the OECD", Defence Economics, Vol. 1, pp 57-73, estimate the simplest form of VAR to test for Granger causality between military spending and unemployment. Section 4 of the paper.

Relevant pages of article are here, here here and here

MEUKHIST.FIT

MEUSHIST.FIT

1. Use UR2 and GU, SM and GSM to replicate the results

2. Use the Johansen procedure to develop the analysis.

3. Is there a cointegrating relation between the two series?

4. How might you develop this approach further?

This following paper uses a cointegrating VAR analysis to investigate arms races between India and Pakistan and Greece and Turkey:

Dunne, J Paul, Nikolaidou, Eftychia, and Ron Smith (1999)"Arms Race Models and Econometric Applications". Chapter 11 in Paul Levine and Ron Smith (eds) (2003) "The Arms Trade, Security and Conflict", Routledge, pp 178-87.

Replicate the results in the text using the following files.

India-Pakistan data

Greece Turkey data