Vasilev, Aleksandar (2020) The Armey Curve in Bulgaria (2000-18) – Theoretical Considerations and Empirical Results. Theoretical and Practical Research in Economic Fields, 11 (1). pp. 21-26. ISSN 2068-7710
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Item Type: | Article |
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Item Status: | Live Archive |
Abstract
In this paper we provide a theoretical basis for the so-called” Armey curve,” the inverted U-shape relationship between the level of government purchases and GDP growth, named after Armey (1995). We use an otherwise standard Keynesian model, augmented with a quadratic relationship between investment and lagged government expenditure, which was documented empirically. This modelling approach is a useful shortcut that aims to capture the common link shared by both variables, namely their dependence on the real interest rate, as suggested also by the extended static IS-LM model. This resulting dynamic relationship is a newly documented stylized fact, at least in Bulgarian data for the period 2000-2018, and the source in the extended Keynesian model that generates an Armey curve for Bulgaria.
Keywords: | armey curve; GDP growth; government purchases; Bulgaria |
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Subjects: | L Social studies > L120 Microeconomics L Social studies > L130 Macroeconomics |
Divisions: | Lincoln International Business School |
ID Code: | 43799 |
Deposited On: | 18 Feb 2021 12:42 |
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