Cover: Defense budget interactions revisited

Defense budget interactions revisited

by Robert Shishko

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The Despres-Dhrymes (D-D) model of defense budget interactions among the United States, the Soviet Union, and the People's Republic of China is reexamined in light of the new CIA estimates of Soviet defense light of the new CIA estimates of Soviet defense spending and the availability of a statistical technique that accounts for the simultaneity in the model's equations. Using a common database, the D-D model is reestimated using the single-equation technique, and the results are compared with the simultaneous equation technique. Neither technique yields estimates that can aid in the selection of U.S. strategies for the long-term competition. As currently formulated, the adjustment process that underlies the D-D model may not be a very good description of the world. It therefore seems worthwhile to explore interactive models that deal with specific arenas of the military competition and that allow for asymmetric lags and systematic misperceptions (for example, the elusive missile and bomber gaps) by one side or another.

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