Home | Databases | WorldLII | Search | Feedback Edited Legal Collections Data

"Conclusion: Business Cycle Theory and Economic Policy" [2004] ELECD 203; in Minsky, P. Hyman; Papadimitriou, B. Dimitri (eds), "Induced Investment and Business Cycles" (Edward Elgar Publishing, 2004)

Book Title: Induced Investment and Business Cycles

Editor(s): Minsky, P. Hyman; Papadimitriou, B. Dimitri

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781843762164

Section: Chapter 10

Section Title: Conclusion: Business Cycle Theory and Economic Policy

Number of pages: 3

Extract:

10. Conclusion: business cycle theory
and economic policy
It has been shown that both linear and non-linear accelerator models,
standing by themselves, are not sufficient for business cycle analysis.
However, it was assumed that such flow of income models can be used as
a core, a skeleton structure, for cycle theory. This use of accelerator models
focuses attention upon the determinants of the parameters of the models,
and it is shown that the parameters of these models depend upon the
behavior of elementary economic units. Accepting the work that has been
done on the relation between households and the propensity to consume,
the relation between individual firm behavior and the accelerator
coefficient has been investigated. In particular, the relationships between
induced investment and financial constraints and market structures have
been studied.
It cannot be claimed that the findings are definitive; in fact, the major
purpose of setting out on this track was to test the plausibility of the
approach. In addition, the tool of analysis selected, a modification of
Marshallian price theory, may be too weak and the factual basis for the
transformation of the findings into a value of the accelerator coefficient is
lacking. Certainly the economic theory of the investment behavior of indi-
vidual firms and the testing of the theory of the investment are among the
major problems in economics. Nevertheless, some results, which may be
viewed as the most tentative of hypotheses, have been obtained.
It has been shown that the investment response of conditional ...