Reassessing the military expenditure–economic growth nexus in the context of geopolitical risk: evidence from Poland

This study investigates the relationship between military expenditure (milex), geopolitical risk (GPR), and economic growth in Poland from 1960 to 2023. While extensive research exists on the economic effects of milex, conflict and political stability, the impact of milex on economic growth within the context of geopolitical risks remains under-examined, particularly in Central European countries. The current global instability, exemplified by the Russia-Ukraine conflict, emphasizes the significance of GPR on economic activities and security. Poland, with a history of prioritizing military strength to safeguard its sovereignty, has seen a significant rise in milex during the last years, due to regional security threats and its strategic position within the North Atlantic Treaty Organization (NATO). Using the novel Fourier Augmented Autoregressive Distributed Lag (FAARDL) methodology to derive short- and long–run estimates, the study reveals that increased milex negatively affects economic growth in the short–run but can potentially support long–run growth by enhancing national security. The results emphasize the critical role of geopolitical stability in shaping economic outcomes and offer policymakers insights into the need for a balanced approach to defence and economic strategies.