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

Arbeitspapier

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.

Object Details

• Language: Englisch

Classification and Topics

• Classification: Wirtschaft ; General Aggregative Models: Keynes; Keynesian; Post-Keynesian ; Investment; Capital; Intangible Capital; Capacity
• Subject: Armey curve ; GDP growth ; government purchases ; Bulgaria

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Vasilev, Aleksandar
• Event: Veröffentlichung
• (who): ZBW – Leibniz Information Centre for Economics
• (where): Kiel, Hamburg
• (when): 2019

Further information

• Handle: http://hdl.handle.net/10419/194183
• Last update: 10.03.2025, 11:43 AM CET