Time variation in the size of the multiplier: a Kalecki–Harrod approach

Mark Setterfield

Review of Keynesian Economics, 2019, vol. 7, issue 1, 28-42

Abstract: A growing empirical literature demonstrates that the size of the expenditure multiplier varies over time, being both larger and consistently greater than one during periods of slow growth and/or recession. This paper contributes to the theory of the time-varying multiplier. It is shown that a combination of Kalecki's dynamic theory of investment and Harrod's 'satisficing' approach to the investment decision furnish a theory in which the 'crowding in' of investment expenditures following an initial demand stimulus gives rise to an elevated expenditure multiplier during times of pronounced macroeconomic distress.

Keywords: multiplier; investment; crowding in; Kalecki; Harrod (search for similar items in EconPapers)
JEL-codes: E11 E12 E22 E32 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (4)

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