Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/222007
Authors: 
Vasilev, Aleksandar
Year of Publication: 
2020
Citation: 
[Journal:] Theoretical and Practical Research in Economic Fields [ISSN:] 2068-7710 [Volume:] 11 [Issue:] 1(21) [Pages:] 19-24
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
Persistent Identifier of the first edition: 
Document Type: 
Article
Document Version: 
Published Version

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