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Government Expenditure Determination and the Multiplier- Accelerator Principal

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In this paper we adopt the analysis of Karpetis C. & Varelas E. (2005), in the context of which the time paths of real income, actual and expected infl ation are determined. Considering the model’s parameters values and initial conditions known a priori, we determine both the amplitude of oscillation in the cases of real income, actual and expected infl ation and a formula, which could be adopted by the Government to defi ne the level of its expenditure in a manner that infl ation’s amplitude of oscillation will be minimized. Performing a simulation analysis we investigate the effects on the amplitude of oscillation in the case of income, actual and expected infl ation, when the level of government expenditure is set not exogenously but endogenously using specifi c formulas determined in our analysis.

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  • Karpetis, Christos & Varelas, Erotokritos, 2006. "Government Expenditure Determination and the Multiplier- Accelerator Principal," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 59(4), pages 503-517.
  • Handle: RePEc:ris:ecoint:0073
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    Keywords

    Multiplier; Accelerator; Optimization; Government expenditure;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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