Testing the Relationship between Public Expenditure and Economic Growth in Romania

In this paper we analyze whether the Romanian economic context confirms the Armey model, and present the relationship between public spending and economic growth that may offer a suitable basis for decision makers. The analysis is based on both annual and quarterly data regarding public spending and economic growth in Romania. After investigating the correlation validity, the analytic results did not confirm the premises related to the Armey Curve for the Romanian context during 1990-2011. However the time interval is marked by unpredictable phenomena such as the transition from the state economy to the market economy and the world financial crisis, both is altering the results. The fact determines us to search the coordinates for developing a new model that describes better the connections and the period characteristics.