On the Change of Periodicities in the Hicksian Multiplier-Accelerator Model with a Consumption Floor

• The Hicksian multiplier-accelerator model with “floor” and “ceiling” continues to be the most successful machine generating business cycles. This is, no doubt, due to its capability of explaining both downturn and upswing through one single model. The “ceiling” is due to a full employment constraint, whereas the “floor” is due to a limit to disinvestment when no worn out capital at all is replaced. However, another “floor” to consumption at zero level seems never to have been discussed. Hence, net disinvestments, even if they are bounded downwards, may also give rise to negative consumption, which is absurd. As we will show, the effect of an additional constraint to avoid this is easy to analyze, and results in a change of the periodicities according to a simple rule.

Ämnesord

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv -- Nationalekonomi (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business -- Economics (hsv//eng)

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Economics

Nationalekonomi

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