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Samuelson's multiplier-accelerator model revisited

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  • Frank Westerhoff

Abstract

As demonstrated by Samuelson, the interplay between the multiplier analysis and the principle of acceleration may generate temporary business cycles. We extend Samuelson's seminal framework in the sense that investors now apply a nonlinear mix of extrapolative and regressive expectation formation rules to predict changes in national income. As it turns out, the emergence of booms and slumps may depend on the sentiment of the investors. If they are optimistic (pessimistic), the economy performs well (badly). Moreover, the model produces sustained and intricate fluctuations in economic activity for realistic values of the marginal propensity to consume and the capital to output ratio.

Suggested Citation

  • Frank Westerhoff, 2006. "Samuelson's multiplier-accelerator model revisited," Applied Economics Letters, Taylor & Francis Journals, vol. 13(2), pages 89-92.
    • Handle: RePEc:taf:apeclt:v:13:y:2006:i:2:p:89-92
    DOI: 10.1080/13504850500390663
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    1. Assous, Michaël & Boianovsky, Mauro & Dávila-Fernández, Marwil J., 2024. "Samuelson's last macroeconomic model: Secular stagnation and endogenous cyclical growth," Structural Change and Economic Dynamics, Elsevier, vol. 69(C), pages 417-426.
    2. Lines, Marji & Westerhoff, Frank, 2010. "Inflation expectations and macroeconomic dynamics: The case of rational versus extrapolative expectations," Journal of Economic Dynamics and Control, Elsevier, vol. 34(2), pages 246-257, February.
    3. Fabio Tramontana & Laura Gardini, 2021. "Revisiting Samuelson’s models, linear and nonlinear, stability conditions and oscillating dynamics," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 10(1), pages 1-15, December.
    4. Filippo Gusella & Engelbert Stockhammer, 2021. "Testing fundamentalist–momentum trader financial cycles: An empirical analysis via the Kalman filter," Metroeconomica, Wiley Blackwell, vol. 72(4), pages 758-797, November.
    5. 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.
    6. Andrášik Ladislav, 2015. "Ergodic Axiom: The Ontological Mistakes in Economics," Creative and Knowledge Society, Sciendo, vol. 5(1), pages 47-65, July.
    7. 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.
    8. Gerasimos T. Soldatos, 2018. "Multiplier–Accelerator Interaction in the Presence of an Underground Economy and Taxation," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 12(2), pages 244-256, May.
    9. Michael Wegener, 2014. "Heterogeneous expectations and debt in a growth model for a small open economy," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 37(1), pages 125-136, April.
    10. Gerasimos T. Soldatos, 2021. "In/Estabilidad bajo el impuesto sobre la renta ideal y el impuesto sobre el consumo ideal," Cuadernos de Economía - Spanish Journal of Economics and Finance, Asociación Cuadernos de Economía, vol. 44(124), pages 33-42, Enero.
    11. Robert Calvert Jump & Engelbert Stockhammer, 2023. "Building blocks of a heterodox business cycle theory," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 46(2), pages 334-358, April.
    12. Tamara Peneva TODOROVA & Marin KUTROLLI, 2019. "An expanded multiplier-accelerator model," Journal of Economics and Political Economy, EconSciences Journals, vol. 6(4), pages 368-382, December.
    13. Ihor Kendiukhov, 2024. "Present Value of the Future Consumer Goods Multiplier," Papers 2402.01938, arXiv.org.
    14. Hohnisch, Martin & Westerhoff, Frank, 2008. "Business cycle synchronization in a simple Keynesian macro-model with socially transmitted economic sentiment and international sentiment spill-over," Structural Change and Economic Dynamics, Elsevier, vol. 19(3), pages 249-259, September.
    15. Wegener, Michael & Westerhoff, Frank & Zaklan, Georg, 2009. "A Metzlerian business cycle model with nonlinear heterogeneous expectations," Economic Modelling, Elsevier, vol. 26(3), pages 715-720, May.
    16. Matsumoto, Akio & Szidarovszky, Ferenc, 2015. "Nonlinear multiplier–accelerator model with investment and consumption delays," Structural Change and Economic Dynamics, Elsevier, vol. 33(C), pages 1-9.
    17. Jean-François Verne, 2021. "Relevance of Chaos and Strange Attractors in the Samuelson-Hicks Oscillator," Economic Thought, World Economics Association, vol. 10(1), pages 32-45, July.
    18. Paulo Reis Mourao & Irina Alina Popescu, 2022. "Revisiting a Macroeconomic Controversy: The Case of the Multiplier–Accelerator Effect," Economies, MDPI, vol. 10(10), pages 1-15, October.
    19. Christos Karpetis & Erotokritos Varelas, 2012. "Fiscal and Monetary Policy Interaction in a Simple Accelerator Model," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 18(2), pages 199-214, May.
    20. Sordi, Serena & Vercelli, Alessandro, 2012. "Heterogeneous expectations and strong uncertainty in a Minskyian model of financial fluctuations," Journal of Economic Behavior & Organization, Elsevier, vol. 83(3), pages 544-557.
    21. Dalla, Eleni & Varelas, Erotokritos, 2016. "An economic model for the interpretation of business cycles and the efficiency of monetary policy," The Journal of Economic Asymmetries, Elsevier, vol. 14(PA), pages 29-38.
    22. 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.
    23. Maria Filomena Barros & Fernando Ortega, 2019. "An optimal equilibrium for a reformulated Samuelson economic discrete time system," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 8(1), pages 1-10, December.
    24. Mauro Gallegati & Laura Gardini & Iryna Sushko, 2021. "Dynamics of a business cycle model with two types of governmental expenditures: the role of border collision bifurcations," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 44(2), pages 613-639, December.
    25. Westerhoff Frank H., 2006. "Nonlinear Expectation Formation, Endogenous Business Cycles and Stylized Facts," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 10(4), pages 1-17, December.

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