The "Armey Curve" in Bulgaria (2000-18): Theoretical Considerations and Empirical Results

Aleksandar Vasilev

EconStor Preprints from ZBW - Leibniz Information Centre for Economics

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 (search for similar items in EconPapers)
JEL-codes: E12 E22 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-mac
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https://www.econstor.eu/bitstream/10419/194183/1/Armey-curve.pdf (application/pdf)

Related works:
Journal Article: THE ARMEY CURVE IN BULGARIA (2000-18) – THEORETICAL CONSIDERATIONS AND EMPIRICAL RESULTS (2020)
Journal Article: The Armey Curve in Bulgaria (2000-18) – Theoretical Considerations and Empirical Results (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:esprep:194183

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