Accelerators in macroeconomics: Comparison of discrete and continuous approaches

Valentina V. Tarasova and Vasily E. Tarasov

Papers from arXiv.org

Abstract: We prove that the standard discrete-time accelerator equation cannot be considered as an exact discrete analog of the continuous-time accelerator equation. This leads to fact that the standard discrete-time macroeconomic models cannot be considered as exact discretization of the corresponding continuous-time models. As a result, the equations of the continuous and standard discrete models have different solutions and can predict the different behavior of the economy. In this paper, we propose a self-consistent discrete-time description of the economic accelerators that is based on the exact finite differences. For discrete-time approach, the model equations with exact differences have the same solutions as the corresponding continuous-time models and these discrete and continuous models describe the same behavior of the economy. Using the Harrod-Domar growth model as an example, we show that equations of the continuous-time model and the suggested exact discrete model have the same solutions and these models predict the same behavior of the economy.

Date: 2017-12
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (3)

Published in American Journal of Economics and Business Administration. 2017. Vol.9. No.3. P.47-55

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