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An expanded multiplier-accelerator model

Journal of Economics and Political Economy

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Title An expanded multiplier-accelerator model
 
Creator TODOROVA, Tamara Peneva; American University in Bulgaria
KUTROLLI, Marin; American University in Bulgaria
 
Subject multiplier; accelerator; open economy; difference equations; Keynesian national-income model; tax multiplier; exports multiplier
E12; C02; E21; E22
 
Description Abstract. This paper revisits the standard multiplier-accelerator model, as advanced by Samuelson. While borrowing on the main assumptions of the multiplier-accelerator, we check the validity of Keynesian theory. Using higher-order difference equations and advanced-level mathematical techniques we solve the tax-augmented multiplier-accelerator model, as well as the open economy one. We find that the values of equilibrium national income are identical to the simple national-income model in the absence of the accelerator. We solve the simple multiplier-accelerator model both in present terms and withprolonged consumption. We solve for equilibrium consumption, tax, and imports which are unaffected by the accelerator. All results conform to Keynesian theory where investment, government spending and exports have a favorable multiplying effect on national income through their respective multipliers. The accelerator coefficient affects neither those multipliers, nor the income and the non-income tax multipliers. Expanding the multiplier-accelerator by the volume of foreign trade, taxation or both does not change the values of Keynesian variables. Adding an accelerator leaves optimal values unaffected but, more importantly, reinforces Keynesian theory.Keywords. Multiplier, Accelerator, Open economy, Difference equations, Keynesian national-income model, Tax multiplier, Exports multiplier.JEL. E12, C02, E21, E22.
 
Publisher Journal of Economics and Political Economy
Journal of Economics and Political Economy
 
Contributor —
 
Date 2020-01-10
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
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Format application/pdf
 
Identifier http://www.kspjournals.org/index.php/JEPE/article/view/1995
10.1453/jepe.v6i4.1995
 
Source Journal of Economics and Political Economy; Vol 6, No 4 (2019): December; 368-382
Journal of Economics and Political Economy; Vol 6, No 4 (2019): December; 368-382
2148-8347
 
Language eng
 
Relation http://www.kspjournals.org/index.php/JEPE/article/view/1995/2005
http://www.kspjournals.org/index.php/JEPE/article/downloadSuppFile/1995/1047
http://www.kspjournals.org/index.php/JEPE/article/downloadSuppFile/1995/1048
http://www.kspjournals.org/index.php/JEPE/article/downloadSuppFile/1995/1049
 
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http://creativecommons.org/licenses/by-nc/4.0