Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/194183 
Year of Publication: 
2019
Publisher: 
ZBW – Leibniz Information Centre for Economics, Kiel, Hamburg
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.
Subjects: 
Armey curve
GDP growth
government purchases
Bulgaria
JEL: 
E12
E22
Document Type: 
Working Paper

Files in This Item:
File
Size
276.08 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.