The impact of economic policies on regional security in the Asia-Pacific region: Panel data analysis based on Economic Policy Uncertainty (EPU)

According to data from the International Monetary Fund's 2024 Regional Economic Outlook: Asia and Pacific, the GDP of Asia-Pacific countries accounts for approximately 65% of the global economy, highlighting the region's growing importance. However, recent Sino-American tensions and rising geopolitical risks have intensified potential political and military conflicts, prompting countries to bolster their military capabilities. Mainstream political economy theories suggest economic interdependence brings peace and security, but the original Trade Expectations Theory struggles to explain current security dynamics in the Asia-Pacific, where national interests and territorial claims may outweigh trade benefits, leading to greater uncertainty. This study uses the ratio of military expenditure to GDP in Pacific Rim countries as a measure of regional stability and security. It incorporates Economic Policy Uncertainty (EPU) as the independent variable, with stock market returns and foreign direct investment as control variables. Empirical analysis through time series and panel data models indicates that EPU has a statistically more significant impact on military expenditure than economic interdependence. The paper aims to refine Trade Expectations Theory in the Asia-Pacific context by analyzing the relationship between economic uncertainty and military expenditure from 1992 to 2022, exploring how national political and economic behaviors influence regional security dynamics.