THE ARMEY CURVE IN BULGARIA (2000-18) – THEORETICAL CONSIDERATIONS AND EMPIRICAL RESULTS

  • Aleksandar VASILEV University of Lincoln, UK

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.

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Published
2020-07-13
How to Cite
VASILEV, Aleksandar. THE ARMEY CURVE IN BULGARIA (2000-18) – THEORETICAL CONSIDERATIONS AND EMPIRICAL RESULTS. Theoretical and Practical Research in the Economic Fields, [S.l.], v. 11, n. 1, p. 21-26, july 2020. ISSN 2068-7710. Available at: <https://journals.aserspublishing.eu/tpref/article/view/5244>. Date accessed: 06 aug. 2020. doi: https://doi.org/10.14505//tpref.v11.1(21).02.