The efficiency of government expenditures policies: use of dummy variables in the regression building of Armey — Rahn curve

The paper is devoted to the capacities of using dummy variables to construct models that approximate the crisis dynamics of the economic indicators. On the example of Armey — Rahn curve describing the relationship between the GDP growth and the share of government expenditures in GDP, it is proved that the use of dummy variables to indicate the years of crisis provides a meaningful and adequate model if the crisis years have located in the middle of the time series. Functions constructed for Ukraine and Russia, clearly answer the question of what years could be considered as a crisis, and what ones determine a stagnation. Simulation results confirm the negative impact of the crisis onto economic growth.