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Second-order accelerator of investment: The case of discrete time

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  • Dalla, Eleni
  • Varelas, Erotokritos

Abstract

This paper presents a discrete time version of Hillinger’s (1992,2005) second order accelerator model that investigates the dynamic behavior of capital, for pedagogical purposes. Such a version is put forward as a means of improving student acquaintance with the analysis of investment cycles -defined as quasi-periodic cyclic movements of capital- and with the convergence towards the steady-state when capital is subjected to trigonometric oscillations. In addition, we extend the analysis, introducing the exogenous interest rate on loans in the behavioral equation of investors. It is inferred that the introduction of this credit term results in a lower equilibrium level of capital.

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  • Dalla, Eleni & Varelas, Erotokritos, 2016. "Second-order accelerator of investment: The case of discrete time," International Review of Economics Education, Elsevier, vol. 21(C), pages 48-60.
    • Handle: RePEc:eee:ireced:v:21:y:2016:i:c:p:48-60
    DOI: 10.1016/j.iree.2015.12.001
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    1. Ioannis Dassios & Alexandros Zimbidis & Charalambos Kontzalis, 2014. "The Delay Effect in a Stochastic Multiplier–Accelerator Model," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 3(1), pages 1-24, December.
    2. Takashi Kamihigashi & Laixun Zhao (ed.), 2009. "International Trade and Economic Dynamics," Springer Books, Springer, number 978-3-540-78676-4, February.
    3. Hillinger, Claude, 2005. "Evidence and Ideology in Macroeconomics: The Case of Investment Cycles," Discussion Papers in Economics 694, University of Munich, Department of Economics.
    4. Eric Bond & Robert Driskill, 2009. "Multiplicity and Stability of Equilibrium in Trade Models with Durable Goods," Springer Books, in: Takashi Kamihigashi & Laixun Zhao (ed.), International Trade and Economic Dynamics, pages 281-297, Springer.
    5. Frank Westerhoff, 2006. "Samuelson's multiplier-accelerator model revisited," Applied Economics Letters, Taylor & Francis Journals, vol. 13(2), pages 89-92.
    6. Ronald W. Jones, 2012. "General equilibrium theory and competitive trade models," International Journal of Economic Theory, The International Society for Economic Theory, vol. 8(2), pages 149-164, June.
    7. Barnett,William A. & Gandolfo,Giancarlo & Hillinger,Claude (ed.), 1996. "Dynamic Disequilibrium Modeling: Theory and Applications," Cambridge Books, Cambridge University Press, number 9780521462754, October.
    8. Hillinger, Claude & Weser, Thilo, 1988. "The aggregation problem in business cycle theory," Journal of Economic Dynamics and Control, Elsevier, vol. 12(1), pages 37-40, March.
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    Cited by:

    1. Eleni Dalla, 2017. "Monetary policy implications on the investment decision: Do economies of scope in the banking sector matter?," Discussion Paper Series 2017_05, Department of Economics, University of Macedonia, revised Mar 2017.
    2. Eleni Dalla, 2018. "On the effect of Cournot and Stackelberg competition in the banking sector on the investment cycle," International Journal of Monetary Economics and Finance, Inderscience Enterprises Ltd, vol. 11(5), pages 499-515.
    3. Ioannis K. Dassios & Mel T. Devine, 2016. "A macroeconomic mathematical model for the national income of a union of countries with interaction and trade," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 5(1), pages 1-15, December.
    4. Ilias Kostarakos & Stelios Kotsios, 2017. "Feedback policy rules for government spending: an algorithmic approach," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 6(1), pages 1-10, December.

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    More about this item

    Keywords

    Hillinger’s second order accelerator model; Investment cycles; Educational macroeconomics;
    All these keywords.

    JEL classification:

    • A20 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - General
    • A22 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - Undergraduate
    • A23 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - Graduate
    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General

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