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A methodological problem in a supermultiplier model with too much acceleration

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  • Reiner Franke

Abstract

This contribution is a critical reconsideration of the supermultiplier model put forward by Serrano, Freitas and Bhering (2019; ‘SFB’) in this journal (Metroeconomica, 70, 263–287). Reformulating their discrete‐time model in a way that makes the length of the adjustment period explicit, it aks whether two elementary postulates of a sound modelling are satisfied: (a) A model should also remain well‐defined when the adjustment period shrinks to zero; (b) The main qualitative dynamic properties should not essentially be affected by the choice of the adjustment period. It is found that postulate (a) is fulfilled but, regarding the presence of cyclical dynamics, postulate (b) is violated. In addition, the stability condition in the continuous‐time version has an unsatisfactory economic implication. On the other hand, a rival supermultiplier model (specified along the lines proposed by, in particular, Allain and Lavoie) is spared from these problems. The analysis suggests that the problem in SFB is caused by too strong an accelerator mechanism.

Suggested Citation

  • Reiner Franke, 2022. "A methodological problem in a supermultiplier model with too much acceleration," Metroeconomica, Wiley Blackwell, vol. 73(1), pages 93-108, February.
    • Handle: RePEc:bla:metroe:v:73:y:2022:i:1:p:93-108
    DOI: 10.1111/meca.12355
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    References listed on IDEAS

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    1. Olivier Allain, 2015. "Tackling the instability of growth: a Kaleckian-Harrodian model with an autonomous expenditure component," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 39(5), pages 1351-1371.
    2. Peter Flaschel & Gangolf Groh & Christian Proaño & Willi Semmler, 2008. "Topics in Applied Macrodynamic Theory," Dynamic Modeling and Econometrics in Economics and Finance, Springer, number 978-3-540-72542-8, July-Dece.
    3. May, Josef, 1970. "Period analysis and continuous analysis in Patinkin's macroeconomic model," Journal of Economic Theory, Elsevier, vol. 2(1), pages 1-9, March.
    4. Franklin Serrano & Fabio Freitas & Gustavo Bhering, 2019. "The Trouble with Harrod: The fundamental instability of the warranted rate in the light of the Sraffian Supermultiplier," Metroeconomica, Wiley Blackwell, vol. 70(2), pages 263-287, May.
    5. Marc Lavoie, 2016. "Convergence Towards the Normal Rate of Capacity Utilization in Neo-Kaleckian Models: The Role of Non-Capacity Creating Autonomous Expenditures," Metroeconomica, Wiley Blackwell, vol. 67(1), pages 172-201, February.
    6. Reiner Franke & Stephen Sacht, 2014. "Some Observations On The High-Frequency Versions Of A Standard New-Keynesian Model," Bulletin of Economic Research, Wiley Blackwell, vol. 66(1), pages 72-94, January.
    7. Reiner Franke, 2017. "A simple approach to overcome the problems arising from the Keynesian stability condition," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 14(1), pages 48-69, April.
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