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In this article, we develop a simple behavioural macrodynamic model in continuous-time with the purpose of investigating the interaction of the real economy and the financial markets. Building on Westerhoff (Discret Dyn Nat Soc, 2012), we improve the specification of aggregate demand by distinguishing between consumption and investment expenditure and assuming that the latter is determined by the flexible accelerator principle. We remove the ad hoc nonlinearity in the fundamentalist behavioural rule and allow the composition of the population between chartists and fundamentalists to be endogenously determined. The resulting nonlinear dynamic systems are shown to generate various dynamic regimes, among which the coexistence of periodic attractors with interesting economic implications. Endogenous investment and stock market dynamics emerge, procyclical to each other, reflecting the interaction of induced investment with alternating waves in speculators’ sentiments. We show that a strong investment accelerator might be a crucial force generating fluctuations that, on the one hand, are transmitted and amplified by chartists and, on the other hand, are contained by fundamentalists.

The article is aimed at substantiating the possibility and expediency of applying the mechanism of social investment in the materialization of infrastructure projects in the Luhansk region as a factor in the vitalization of activities of the regional construction enterprises in the period of post-crisis transformation. The features of construction industry are considered, its impact on meso-economic transformations is defined with the help of correlation analysis. It is determined that the change in the volume of gross regional product of Luhansk region by 88,76% is caused by the impact of changes in the volume of construction and installation works in the region. The problems of the modern stage of development of Luhansk region as a region of post-crisis transformation are outlined, the main problems and obstacles to the restoration of the socio-economic system of the region, including its construction industry, are specified. In particular, a number of social problems is identified, to which regional construction enterprises need to be involved; the need to restore objects of social and transport infrastructure, to build housing for preferential categories of citizens, displaced persons etc. is specified. It is noted that in the Luhansk region in the post-crisis period there is a very acute problem of scarcity of financial resources because of the negative impact of crisis phenomena on the budgetary potential of the region. The need to introduce a mechanism of social investment in the practice of implementation of socially significant construction projects in the conditions of post-crisis economic recovery of the region is substantiated. An algorithm for making decisions on the implementation of socially significant projects involving construction enterprises in the region is proposed.

Cyclical fluctuations in the market economy have been the focus of attention of researchers for many years. Today, the process of reproduction is becoming cyclical, which is a problem of interest of all economic agents. The purpose of the article is to reveal the main causes of economic cycles, their nature and to show the effect of cyclical fluctuations on the production process and employment, as well as in the development of a new socio-economic society as a whole. The article shows the essence of each stage, their disadvantages and advantages, influence on the formation of a creatively developed person.

This contribution builds on the accelerator model to produce an investment function in which employment and households' investment are used as proxies for economic activity. This analysis identifies a positive correlation between corporate investment in fixed assets and households' investment in dwellings. Using a panel of 11 OECD countries for the period 1970–2010, the results also confirm that oil prices and interest rates may dampen firms' investment in fixed assets. An interesting feature of this investment function is that it accounts for uncertainty.

This paper aims to detail Frisch’s choice of setting the accelerator principle at the core of his impulse-propagation model (1933a), referred to as the “rocking horse model.” The innovative aspects of this model rest not only on the rise of macrodynamics regarding the equilibrium concept but also on the reformulation of business cycles in terms of production of capital goods. This is a deliberate choice, which relies on his work on business cycles started in 1927, and can be obviously traced back to his debate with John Maurice Clark and the American Institutionalists, but relies more deeply on a specific appropriation of Norwegian approach to this principle.

In this paper we derive a theoretical macro accumulation function, which relies on the accelerator principle and is complemented by utilizing capacity and profits. This investigation also accounts for several sources and kinds of uncertainty: exchange rates for financial uncertainty, oil prices for political uncertainty and interest rates for stock market uncertainty. The latter purports to account for the relationship between physical and financial investment. We also take on board the role of conventions in an attempt to account fully for uncertainty. In doing so, we include the relevant variables as deviations from their conventional levels. In the second part of the paper we estimate the investment function, by means of the system GMM in a panel of 12 OECD economies over the period 1970–2010.

This report highlights recent economic updates in Bangladesh as of April 2015. Economic growth in Bangladesh was gaining momentum in the first half of FY15. Capacity utilization improved and investments were showing some signs of recovery. This growth was also job-friendly. The 12-monthly-moving average inflation decelerated from 7.6 percent in February 2014 to 6.8 percent in February 2015. The resilience of the Bangladesh economy continues to be tested by faltering political stability, weak global markets, and structural constraints. These are inhibiting the economy s income growth as well as progress on shared prosperity. Despite the emergence of a $1.3 billion deficit in the current account in the first seven months of FY15, the surplus in the overall balance of payments has been sustained, leading to continued accumulation of official foreign exchange reserves to prevent nominal exchange rate appreciation. Reserves are at a comfortable level at over 6 months of imports of goods and services. Fiscal policy has remained consistent with macroeconomic stability. Tax revenue growth has been weaker than targeted while expenditure have also been short due as usual to an implementation shortfall. The projected recovery in global growth, particularly in the United States and the Euro Zone, and continued softness in international commodity prices, bode well for Bangladesh. The country will need to restore political stability and implement faster structural reforms to capitalize on these opportunities. The potential GDP growth rate is on a declining path due to declining labor force growth and stagnant productivity growth, as well as the rate of capital accumulation. Raising the low Female Labor Force Participation (FLFP) rate offers on opportunity to boost the economy s potential growth rate. Moving forward, the biggest challenge remains ensuring durable political stability. This is a precondition for accelerated, inclusive, and sustainable growth.

The Keynesian intuition that increasing consumption can stimulate investment is verified empirically using US macroeconomic data. The investment multiplier is hypothesized to increase monotonically with the propensity to consume. However, the functional relationship is not that of the Keynesian multiplier, as assumed axiomatically but incorrectly, in standard Keynesian economics. By modelling the investment multiplier as a power function of the consumption propensity, with empirically estimated parameters, we show that there exists an optimal level of aggregate consumption which maximizes national economic growth by balancing aggregate demand and supply in a dynamic equilibrium. For the US economy, the optimal aggregate consumption is estimated to be about 88 percent of the gross domestic product (GDP) over the data period. With the US aggregate consumption propensity already well past the optimal level in recent decades, US government policies to stimulate more consumption to increase economic growth have been counter-productive for several decades.

We test the impact of uncertainty on investment of Chinese firms during market transition with a sample of 195 firms in the machinery industry in Liaoning province of China during 1993–1998. The system Generalized Method of Moments (GMM) estimates show that both demand and labor costs uncertainties do not affect investment of state enterprises, while labor costs uncertainty has a positive effect on investment of collective firms. This result suggests that managers of state enterprises have little incentive to respond to uncertainty probably due to the ex ante arrangements of the contract responsibility system, while collective firms show risk-taking behavior during market transition. We also find that sales growth is an insignificant signal for investment of both state and collective enterprises, violating the standard accelerator principle. We provide a few possible explanations to this result.

A model of macroeconomic complementarity is used to assess causes of comovement in investment spending across nine sectors of the U.S. economy. It is hypothesized that the irreversibility and uncertainty of investment spending imply a greater role for investment linkages and aggregate factors in investment fluctuations compared with estimates for employment and output. For the average sector, past investment growth across all sectors, changes in aggregate demand, and a common factor account for two-thirds of the variance of investment growth. After accounting for aggregate demand, sectoral shocks explain 70% of the average sector’s innovations to investment growth.

Do all types of demand have the same effect on output? To answer this question, I estimate a cointegrated vector autoregressive (VAR) model of consumption, investment, and government spending on US data, 1955–2007. I find that: (1) economic growth can be decomposed into a short-run (transitory) cycle gravitating around a long-run (permanent) trend made of consumption shocks and government spending; (2) the estimated fluctuations are investment dominated, they coincide remarkably with the business cycle, and they are highly correlated with capacity utilization in both labor and capital; and (3) the long-run multipliers point to a large induced investment phenomenon and to a smaller, but still significantly positive, government spending multiplier, around 1.5. The results cover a lot of theoretical ground: Paul Samuelson’s accelerator principle, John Kenneth Galbraith’s stress on consumption and government spending, Jan Tinbergen's investment-driven business cycle, and Robert Eisner’s inquiries on the investment function. The results are particularly useful to distinguish between economic policies for the short and long runs, albeit no attempt is made at this point to inquire into the effectiveness of specific economic policies.

A new Framework is provided to measure the impact of an increase in government expenditure on private investment. For this purpose a framework based on the Box–Cox transformation is introduced and tested using annual time-series data, 1958–1988, from 25 OECD countries. The results obtained support the ‘accelerator principle’ conclusively and the ‘crowding out’ hypotheses.

The principles of income multiplier and the investment 'accelerator' play important role in determining the national income. This paper attempts to highlight that the ideas contained in Keynes' Multiplier and the Accelerator Principle are found in an Indian economic thought - Thirukkural, and that these concepts were recognized as of much significance for the sustenance and growth of any economy. This paper also implies a sketchy model of the theory of income in the lines of John Maynord Keynes and also highlights the recognition and theorizing the concepts like income multiplier and investment accelerator much before Keynes that is just 2000 years ago!

The main objective of this short paper is to measure the impact of increases in total, federal and state government expenditures on private investment in the USA. For this purpose a framework based on a variable elasticity approach is used and tested. The results obtained conclusively support the ‘accelerator principle’ and ‘crowding out’ hypothesis.

A General Equilibrium model of investment is constructed in which the pay-offs of firms depend on each other''s actions. It is shown that when these actions are unobservable but aggregate output is in the information set of the agents; it acts as a signal. The implication is that output will lead investment over the business cycle. This gives a theory of the Rational Expectations Investment Accelerator. Learning also changes the cyclical behaviour of the endogenous variables and leads to a loss of output and efficiency. The inefficiency depends on the amount of noise in the system thus reducing fluctuations can have first-order welfare effects. It is also shown that the introduction of a stock market will not alter the qualitative conclusion of the paper. The intuition of this paper for the investment accelerator also suggests that an "employer accelerator" might exist. An economic investigation of the US and UK data gives support to these accelerators. Also, the model predicts, investment is less responsive to output when its conditional variance is higher.

We show that the flexible accelerator principle characterizes optimal investment behavior only when the firm's technology exhibits decreasing returns to scale throughout. When there are increasing returns we show that there is a range in which investment increases as the capital stock increases towards its long-run equilibrium level.

Many scholars have noted that, since at least 1790, U.K. economic fluctuations have seemed to reach major peaks every 7–10 years. Keynes (1936, ch.18) used the elements of his theory to explain non‐periodic economic fluctuations. His explanation of periodic fluctuations, i.e. cycles, appears in Chapter 22 of the General Theory. As is well known, he believed that fluctuations in “animal spirits” (that were often only loosely connected with the cost and the real rate of return on capital) led to oscillations in investment which, combined with the durability of capital goods, caused the duration of modern major cycles; fluctuations in liquidity preference and the propensity to consume played lesser roles. Bowing to Jevons (1964), Keynes also noted that unstable agricultural inventories could have been a source of waves in the early 19th Century when agriculture was relatively more important in the U.K. But Keynes did not demonstrate just how his investment theory implied a definite cycle period, because he did not merge his multiplier with the accelerator principle to provide an endogenous explanation of periodic turning points in output. Consequently, as Hicks (1950, p. l) notes, Keynes did not demonstrate how investment and income could peak every 7–10 years; his was really a theory of nonperiodic waves.

A model is developed and tested to relate three categories of inventory accumulation to expectations of real income, inflation and interest rates through anticipated real corporate wealth effects. Expected future inflation leads firms to accumulate more inventories in advance financing them by means of ‘liquid’ assets to offset an anticipated loss of real wealth. Expected increases in interest rates have an impact on inventory accumulation opposite to that of expected future inflation. Past wealth effects are also allowed for by means of the accelerator principle. Finally, the growth rate of real income generally has a signifiant influence on inventory accumulation.

In the presence of aggregate demand spillovers, an imperfectly competitive form's profit is positively related to aggregate income, which in turn rises with profits of all firms in the economy. This pecuniary externality makes a dollar of a firm's profit raise aggregate income by more than a dollar since other firms' profits also rise, and in this way gives rise to a "multiplier." Since such multipliers are ignored by firms making investment decisions, privately optimal investment decisions under uncertainty will not in general be socially optimal. Under reasonable conditions, investment is too low.

There has long been a debate on the relative roles of the cost of capital on the one hand and the expected level of sales or output on the other as determinants of the investment behaviour of firms. Linked to the role of the cost of capital is the question of the efficiency of cost of capital government policies, including changes in tax parameters, as well as the question of whether or not investors behave as in a walrasian or notional world. Otherwise the role of expected sales opportunities refers to the so-called accelerator principle, reinterpreted in a more modern way as the illustration that investors are facing quantitative constraints on the market for the goods they produce.

The present paper shows how a negative fiscal multiplier is possible in a two-sector economy that is otherwise similar to the traditional one-sector Keynesian analysis. The key to this surprising possibility is that an increased budget deficit changes the sectoral balance of demand. A reduction of taxes or an increase in transfer payments raises the demand for consumer goods. At the same time, the rise in the interest rates that results from the deficit causes a fall in the demand for investment goods. In the one-good economy assumed in both Keynesian and monetarist theories, the intersectoral shift of demand is of no consequence. But when consumer goods and investment goods are explicitly distinguished, the change in the sectoral pattern of demand causes separate changes in the prices of the two kinds of goods. As a result, the overall price level can rise even if the total real volume of output declines. The rise in the overall pricelevel implies a reduction in the real value of the money stock. The contractionary effect of the decline in the real money stock can more than offset the direct expansionary effect of the increased deficit. The net effect of the increased deficit can therefore be to reduce real GNP. The paper analyzes the conditions which affect the likelihood that the fiscal multiplier is negative. It is important to distinguish this demand composition reason for a negative multiplier from two other possibilities that have previously been discussed: (1) the adverse effect of budget deficits on business "confidence" and (2) the contraction of current demand that occurs if anticipated future budget deficits raise real long-term interest rates.

Publisher Summary This chapter discusses the impact that changes in investment, government spending, and saving have on income According to the multiplier principle, independent changes in planned investment, government expenditures, and consumption have a magnified impact on income. Income increases by some multiple of the initial change in spending. The multiplier is the number by which the initial investment is multiplied to obtain the total amplified increase in income. The size of the multiplier increases with the marginal propensity to consume. When resources are idle, each round of additional spending generated by the multiplier would expand real output and employment. When there are few idle resources, the increased spending would be inflationary. The Keynesian model points to a low level of investment, and aggregate demand, as the cause of a recession. The identification of the problem also suggests a solution. If aggregate demand is too low, public policy can be used to stimulate it. Association is not causation. The monetarists believe that changes in investment are the result—not the cause—of changes in the real gross national product. They believe that economic instability is the result of fluctuations in the supply of money.

AT A TIME when most parts of macro-economic theory are concerned with dynamic problems, monetary economics remains almost entirely static. The impact of changes in the money supply, for example, is normally analyzed within the Hicksian "IS-LM curve" framework, which permits only the comparison of positions of static equilibrium and cannot be used to analyze the path of the economy when it is out of equilibrium.' While several theories are available purporting to explain shifts in the IS curve (of which the accelerator principle is the simplest), most recent empirical research in monetary economics has concentrated on the shape of the LM curve (i.e. on the form of the demand-for-money and supply-of-money functions). Recent empirical work, which seems to indicate that permanent income, measured as an exponentially weighted average of past income, provides a better explanation of the demand for money than does measured income, introduces lagged variables into the demand-for-money function for the first time and suggests one route by which dynamic considerations may enter monetary economics. The purpose of this paper is to suggest another route by questioning a basic assumption of most recent empirical research. While not offering an alternative to the. Hicksian formulation, the results presented here suggest that it may be a misleading way of looking at the real world, especially in the short run. Section I provides the main theoretical underpinnings for the empirical studies reported in Sections II and III. Section IV provides a summary of the results and offers some tentative conclusions.