ABSTRACT/RÉSUMÉ 3

Fiscal and macroeconomic impacts of defence spending 7

1. Introduction 7

2. Recent trends in defence spending in OECD countries 8

Trends and targets for total defence spending 8

Composition of defence spending 11

Plans for capital spending, stock building and additions to military personnel 13

Non-core defence-related spending 15

Trade in military equipment 16

3. Fiscal implications of higher defence spending 17

Fiscal context to re-armament 17

Longer-term fiscal pressures 19

Risks to the fiscal outlook from defence inflation 20

4. The near-term economic effects of higher defence spending 23

Factors that influence the size of near-term defence spending multipliers 25

5. The longer-term economic effects of defence spending 30

Types of defence spending that might have positive long-run effects on output 30

Factors that might influence the long-term economic impact of defence spending 35

6. Avenues for further research 36

References 37