Investigating Validation of Armey Curve Hypothesis for G7 Countries using ARDL Model

Gürkan Bozma, Selim Başar, Murat Eren

Öz


The effect of the government size on economic growth still keeps its unclear status despite the works in this field. According to the Armey Hypothesis (1995), which one of the studies developed for the volume of government size in economy, the increase in the public volume in economy will increase economic growth up to a certain level, and when the maximum level is reached, the increase in public volume will cause decreases in economic growth. In this study, the issues of whether the Armey Hypothesis is valid or not for G7 countries has been investigated, and the optimum public volume has been determined for G7 countries. In testing Armey Curve hypothesis, we use ARDL cointegration procedure. The results of empirical findings argue that the Armey Hypothesis is valid for US, and Canada, and France when it is invalid for other G7 countries.


Anahtar Kelimeler


Armey Curve, Government Size, Economic Growth, Cointegration.

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Doğuş Üniversitesi Dergisi
Acıbadem Zeamet Sokak, No: 21
34722 - Kadıköy, İSTANBUL
E-posta: journal@dogus.edu.tr