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Rationality and Cycles in the Multiplier- Accelerator Model

In: Business Cycles

Author

Listed:
  • J. P. Laffargue

    (University Of Paris And Cepremap)

  • P. Malgrange

    (University Of Paris And Cepremap)

Abstract

Our objective is to build a discrete time-dynamical model embodying intertemporal consumption and accumulation mechanisms as well as government intervention, but as simple and close to the macroeconometric practice as possible. We thus consider a closed economy involving three types of representative agents (firms, consumers, government) and four types of commodities (labour, all-purpose goods, operative capital, government bonds). There is no money. The all-purpose good is taken as numeraire. The (real) wage rate o> and the (real) interest rate r on bonds are supposed exogenously given at levels consistent with positive profits. Because of arbitrage condition between capital and bonds, the stock market value, q, of one unit of operative capital is the only flexible price. In this section we consider the intertemporal programme of the consumer.

Suggested Citation

  • J. P. Laffargue & P. Malgrange, 1991. "Rationality and Cycles in the Multiplier- Accelerator Model," International Economic Association Series, in: Niels Thygesen & Kumaraswamy Velupillai & Stefano Zambelli (ed.), Business Cycles, chapter 7, pages 157-182, Palgrave Macmillan.
    • Handle: RePEc:pal:intecp:978-1-349-11570-9_7
    DOI: 10.1007/978-1-349-11570-9_7
    as

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