A Theory of the Regional Accelerator

Philip Black

Studies in Economics and Econometrics, 1996, vol. 20, issue 2, 25-30

Abstract: This paper develops an open-economy model highlighting the interaction between the regional income multiplier and the regional accelerator. A distinction is made between temporary and permanent changes in regional income, where the latter is partly determined by interregional trade repercussions. Induced investment is assumed to depend only on the permanent component of past changes in regional income. But induced investment itself also consists of a temporary and a permanent component, and given the convergent nature of changes in regional income, the model focuses only on the permanent component of induced investment.We find that the total permanent change in regional income depends on the size of induced investment coefficients in each of the trading regions, the permanent components of such investment activity, and the relevant consumption and import propensities. Similarly, for a small open economy such as that of a region, import leakages will ensure that the time path of regional income is dynamically stable.

Date: 1996
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DOI: 10.1080/03796205.1996.12129092

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