Reassessing the military spending–economic growth nexus in the ‘shadows’: selected Balkan countries, 1990–2022

Informality plays a pivotal role in developing and transition economies, where it can hinder growth, policy effectiveness, and competition, while also reducing regulatory burdens and enhancing competitiveness. Military expenditures (milex) support national security, attract capital, and promote social order but may divert resources from more productive sectors. This study builds on existing literature to re-examine the milex–economic growth nexus in the context of informality across selected Balkan countries (1990-2022). Using panel autoregressive distributed lag (P-ARDL) and cross-sectional augmented (CS) P-ARDL models, it explores both short – and long – run relationships. By incorporating widely accepted informality indicators, the study ensures consistency and comparability with prior research. Findings reveal that milex negatively impacts economic growth, even when informality is accounted for. While informality boosts growth in the short – run, it undermines it in the long – run. These results, confirmed through robustness checks, offer critical insights for policymakers aiming to promote sustainable development, social stability, and national security.