DOES THE FUNDING OF THE DEFENCE SECTOR DEPEND ON ECONOMIC FACTORS IN THE LONG RUN? THE CASES OF ESTONIA, LATVIA, AND LITHUANIA

The purpose of this publication is to study the dependence of defence funding on economic factors, namely the prosperity of the country, economic growth, the budget deficit, gross government debt, and inflation rate. The investigation uses secondary data obtained from the Eurostat database and covers the period from 1997 to 2021. The author analyses three Baltic countries such as Estonia, Latvia, and Lithuania, to ascertain which economic factors have a statistically significant effect on defence sector funding. For this purpose, the author applies correlation analysis and automatic linear modelling (ALM). The findings of the investigation showed differences and similarities between the countries under consideration. In the case of Estonia, defence funding is significantly affected by the prosperity of the country, which is expressed in real GDP per capita, and gross government debt. These economic factors explain 92.6 per cent of defence funding. The cases of Latvia and Lithuania are very similar in terms of the influence of economic factors on defence spending. In these countries, the tendencies of real GDP per capita significantly effect on defence funding. This influence is slightly different and amounts to 76.2 and 78.4 per cent, for Latvia and Lithuania, respectively. The insights of the research can be useful to the governments of these nations when making decisions about defence funding aimed at ensuring security in the Baltic region

Military and demographic inter-linkages in the context of the Lithuanian sustainability

This paper aims at investigating military and demographic inter-linkages in the context of the Lithuanian sustainability. The investigation combines three important economic aspects such as demographic, military and sustainable development. The authors have revealed that demographic trends should be seen as a necessary conditions for ensuring the functioning of the military sector contributes to public security and sustainable development in general. Correlation and stepwise regression analysis, also Monte Carlo forecasting method have been applied for this purpose. Research results have revealed statistically significant interrelationship between military personnel as a share of total labour force and population growth rate, population median age, total fertility rate as well as birth rate. Moreover, Monte Carlo forecasting method allowed revealing for the next 10 years a steady slight increase in armed forces personnel, stable population growth rates, a rapid aging process and a slight decline of total fertility rate. Military and demographic estimations and future projections allow government to incorporate information into planning and sustainable development policy. The insights from this research may contribute to implementing the goals of sustainable development related to eradication of poverty, inequality, social exclusion, improvement in education, well-being and employment and tackling climate change

Military Human Potential in the Context of Defence-Growth Relationship: Evidence from the Baltic States

Contemporary studies show that military power depends not only on manpower, weapons, or resources, but in many cases, success on the battlefield is determined by the potential of human capital, including knowledge, kills, competences, and other capacities [1; 2]. Using a cost-based approach, the author focuses on the input side assessing military human capital potential in the context of defence expenditure – economic development nexus in the Baltic countries, such as Lithuania, Latvia, and Estonia. The investigation covers the period between 2004 and 2020. Defence expenditure on personnel has been used as a proxy for military human capital potential, and real gross domestic product (GDP) per capita as a proxy for economic development. Research is carried out using econometric methods, including Spearman’s correlation analysis and Automatic Linear Modelling (ALM). The research results reveal that investments in military personnel have significant and positive impact on economic development in the Baltic states. Defence expenditure on personnel explains 63.7 percent of variation in real GDP per capita in Lithuania, 71.3 percent in Latvia, and 63.4 percent in Estonia. The author hopes that the findings of the investigation will extend the scope of research across the Baltic States and will be useful for the achievement of Sustainable Development Goals (SDG 8, economic growth)

The Impact of a Banking Sector on Economic Growth: Theoretical and Practical Aspects

The article the Impact of a Banking Sector on Economic Growth: Theoretical and Practical Aspects" provides a theoretical survey of the possible effects of a banking sector on economic growth, which includes a brief theoretical analysis of the role and functions of financial intermediaries in the economy and the empirical analysis of the effects of a banking sector on economic growth. Refering to the statistical regression models, the most influential factors of a banking sector to the economic growth have been highlighted, their impact is evaluated and economic interpretation of traced relationships presented

Structural trends of defence expenditure in the Baltic countries

The examination of the link between defence and economic growth has provided different results across the countries. Broadly, in economically strong countries, the researchers have detected a bidirectional and unidirectional causality running from defence to economic growth. In economically weaker countries, the causality has appeared to run from economic growth to defence or non-existent. Defence spending has been determined by political, strategic and economic factors. In Estonia, other defence expenditure, including operations and maintenance spending, dominated over the period of 2004-2018. In Latvia and Lithuania, expenditure for personnel, including military and civilian spending and pensions, prevailed in the total defence structure. Over the period analysed, Latvia has had more dynamic structure of defence expenditure than Estonia and Lithuania. This has been mainly due to a significant increase the defence spending share for equipment and decrease for personnel. The intensity of changes in Latvia’s defense spending has been more than three times higher than in Estonia and 1.5 times higher than in Lithuania.The most significant dissimilarity has been revealed between the defence expenditure structures of Estonia and Lithuania in 2004 and 2018 as well. In 2004, Estonia and Latvia had the most similar structures of defence expenditure. In 2018, however, Latvia and Lithuania were the most similar countries in term of defence expenditure structure

The Research of the economic structural chantes : energy consumption aspect

This study consists of two research aspects. First of all, the author analyses the relationship of energy consumption and economic growth in the context of 13 selected countries in the period of year between 1990 and 2010. Secondly, using statistical techniques the paper takes into account cross-sectoral dependence when analyzing the relationship between energy consumption and economic structures of the same countries. Based on the energy consumption, the countries are divided into three groups: low energy consumption group, middle energy consumption group, and high energy consumption one. Statistical methods, including correlation analysis are employed for the estimation of the structural changes of economy and relationship between energy consumption and economic structure in each of the three groups. In general, the results of this study indicate that energy consumption is closely related to all economic activities for all groups of countries; however the case of Lithuania reveals the absence of relationship between energy consumption and industrial sector. Moreover, in the context of comparative analysis, China, as a high energy consumption country, has a completely different picture of economic structure as well as relation between energy consumption and structural changes. Economic sectors, such as industry, services and agriculture depend on energy resources, but in different degree in these three groups of countries

Dependence of economic growth on government expenditure by function in the Baltic states

The aim of this research is to examine the dependence of economic growth on government spending by function in the Baltic countries – Lithuania, Latvia, and Estonia. The author has used total expenditure and composition approaches to explore the relationship between the variables. The investigation covers the period from 1996 to 2020. The author has employed descriptive statistics and econometric techniques, including automatic linear modelling (ALM). The study's insights reveal that the growth of the Latvian and Estonian economies depends on general government spending. This dependence is similar in both countries, that is, 62.8% in Latvia and 66.5% in Estonia. In Lithuania, 57.7% of fluctuations in economic growth are explained by spending on social protection. In Latvia, the influence of spending on social protection and economic affairs amounts to 63.4% of economic growth. In Estonia, spending on social protection and health explains 78.1% of the fluctuations in economic growth. The findings of the study may be useful in ensuring a more efficient allocation of government finances in the Baltic states

Energy intensity in the Lithuanian manufacturing sector

There is major concern with Lithuania’s industrial development because its manufacturing structure is increasingly dependent on the consumption of energy. In spite of the Lithuanian energy intensity decrease more than 35 percent in the last decade, the energy required to produce a unit of output in Lithuania twice exceeds the average of the European Union countries. This paper investigates the energy intensity from a production theoretic framework and uses annual data of 1998- 2011 to measure energy intensity in the Lithuanian manufacturing sector. The investigation compares energy intensity in manufacturing across different activities, based on several models. The results of the research show considerable variation in energy intensity across the activities. Based on energy intensity ratio, the Lithuanian manufacturing activities are classified into three categories, such as high energy- intensive, moderate energyintensive and low energy- intensive. The research reveals a strong and negative interrelationship between intensity of energy consumption and manufacturing production. Over a period of 1998-2011, the contribution of high energy-intensive industries to total manufacturing value added was increasing and amounted to 30 percent at the end of 2011. F inally, the research provides insights, that restructuring of the activities from energy intensive industries towards more technologically advanced ones might potentially lead to higher energy efficiency and it could be one of the most important routes to sustainable development