Edited by Dimitri B. Papadimitriou
Chapter 3: The Generation of the Accelerator Coefficient
3. The generation of the accelerator coeﬃcient Even though the accelerator coeﬃcient has been used in a considerable number of business cycle models, there has been relatively little in the literature on the mechanism by which its value is determined. In this chapter I wish to do the following: (a) examine statements by a number of authors as to the mechanism by which the value of the accelerator is determined, and (b) set out the relevant factors which enter into the determination of the value of the accelerator coeﬃcient. These relevant factors will form the basis for the theoretical analysis of the behavior of business ﬁrms which follows. The examination of the statements of the mechanism which determines the value of the accelerator will not be comprehensive; rather it will be limited to the remarks of a few authors. As was mentioned earlier, at least three diﬀerent concepts as to the nature of the accelerator coeﬃcient can be identiﬁed. These are: 1. The accelerator as a structural parameter. 2. The accelerator as a coeﬃcient of induced investment. 3. The accelerator as a coeﬃcient of realized investment. Prior to taking up the rationalizations for the use of the accelerator which have been put forward, it is necessary to clarify these diﬀering concepts. If the aggregate accelerator coeﬃcient is interpreted to be a structural parameter, then it is derived from the production function. Typically in such models the production function states that...
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