ABSTRACT
A signi fic ant part of recent liter at ure on both growth and businesscycle theory has been based upon some form of an inter ac tion between a consump tion (saving) rela tion and an induced invest ment rela tion. The authors who have construc ted these acceleratormultiplier models have paid little, if any, atten tion to the monet ary prerequis ites and effects of the assumed processes.1 Obviously the acceleratormultiplier process takes place in the context of some monet ary system. In this article the manner in which the time series gener ated depends upon the inter ac tion of an accelerator multiplier process and the monet ary system will be invest ig ated: the main emphasis will be on the upper turning point and the possib il ity of gener at ing steady growth. In this article the lower turning point is unex plained aside from noti cing how the various monet ary systems can act as a brake on disin vest ment and also, by chan ging liquid ity, set the stage for a recov ery. The proced ure will be to examine the result of combin ing a linear
acceleratormultiplier model with a number of altern at ive monet ary
systems. The terms (interest rate) and the manner (type of liab il ity) of finan cing invest ment are affected by the beha vior of the monet ary system. In turn, both moneymarket condi tions and the balancesheet struc ture of firms affect the response of firms to a change in income. This can be inter preted as making the accel er ator coef fi cient an endo gen ous vari able related to the monet ary system. Hence the mater ial in this article could be form al ized as a series of nonlin ear acceleratormultiplier models.2