The purpose of this study is to explore the two-way causal relation between the Defence Expenditure (hereafter DE) and the GNP of the Republic of China, by multiple time series analys. It is a further research of comparing with the GNP of the Republic of China, by Yeh, C.J. & Chang, C.S. (1) This study indicates that the GNP has an effect on the DE, but that the effect of the DE on the GNP is not significant. In addition to constructing the multiple time series model to explore the causal relation of the DE and the GNP, the result of this paper, the effect of the DE on the GNP is different with Yeh's.