Testing for causality in the Richardson arms race model

This paper shows that the Hsiao test can be used to test the causal implication of the Richardson model demonstrating arms race between U.S. and the U.S.S.R. in the presence of China. The impact of Strategic Arms Limitation Talks (SALT I) upon the arms race of the U.S. and the U.S.S.R. is also examined. Two conclusions can be drawn from this study: First, it was found that it was the growth in the U.S.S.R. armament that ‘Granger caused’ the growth in U.S. arms spending over the period from 1952 to 1981. Second, there seems little evidence that SALT I has had any impact upon the armaments of either the U.S. or the U.S.S.R..