This paper studies the causal relationship among GDP (Gross Domestic Product), Exports, Military Expenditure and Education Expenditure in South Korea by analyzing annual time-series data for the period 1970-2008. The Data on Defense Expenditure was collected from a secondary source: a research paper of Defense Spending and the Arms Race on the Korean Peninsula (2009: 69-99). The remaining data were obtained from the World Bank’s World Development Indicators.
Indeed these variables are useful to observe the socio-economic characteristics and development of South Korea. South Korea is one of the economic powers in Asia and the world, and the government develops its country’s educational system. As a country without natural resources, South Korea has grown as industrialized country. On the other hands, South Korea is still encountering the national security problem. This study examines these variables’ causality to find out how these variables influence each other.
Several time-series methods are employed in the empirical study. They are unit-root tests, co-integration tests, vector autoregressive (VAR) or vector error correction (VEC) models, and Granger causality tests.
