A game theory for peace or conflict and peace equilibrium in South Asia: a diplomatic decision of guns versus butter

This study analyses an arms race in South Asia with the help of the VAR-VECM model. A big nation's enormous spending on defence distorts the pattern of public expenditure in small countries and generates a ripple effect in a particular geography. Some evidence indicates the short-term and long-term presence of the arms race in South Asia. In the short run, Indian defence spending has a unilateral causality with Pakistan's defence spending and a bilateral cause with China's defence spending. In the long run, Indian defence spending has a time break from both nations' defence spending, which is incorporated in the model with a dummy variable and has a significant result. The study discusses the trade-off between peace and conflict, which may help notions to find a peace equilibrium, which may generate long-term peace and prosperity in South Asia with a balancing approach.