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Second-order accelerator of investment: The case of discrete time

Eleni Dalla and Erotokritos Varelas

International Review of Economics Education, 2016, vol. 21, issue C, 48-60

Abstract: This paper presents a discrete time version of Hillinger’s (1992,2005) second order accelerator model that investigates the dynamic behavior of capital, for pedagogical purposes. Such a version is put forward as a means of improving student acquaintance with the analysis of investment cycles -defined as quasi-periodic cyclic movements of capital- and with the convergence towards the steady-state when capital is subjected to trigonometric oscillations. In addition, we extend the analysis, introducing the exogenous interest rate on loans in the behavioral equation of investors. It is inferred that the introduction of this credit term results in a lower equilibrium level of capital.

Keywords: Hillinger’s second order accelerator model; Investment cycles; Educational macroeconomics (search for similar items in EconPapers)
JEL-codes: A20 A22 A23 E10 E32 E40 (search for similar items in EconPapers)
Date: 2016
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Working Paper: Second-Order Accelerator of Investment: The Case of Discrete Time (2015) Downloads
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