Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/249781 
Year of Publication: 
2021
Series/Report no.: 
Working Paper No. 993
Publisher: 
Levy Economics Institute of Bard College, Annandale-on-Hudson, NY
Abstract: 
This paper provides a theoretical and empirical reassessment of supermultiplier theory. First, we show that, as a result of the passive role it assigns to investment, the Sraffian supermultiplier (SSM) predicts that the rate of utilization leads the investment share in a dampened cycle or, equivalently, that a convergent cyclical motion in the utilization-investment share plane would be counterclockwise. Second, impulse response functions from standard recursive vector autoregressions (VAR) for postwar US samples strongly indicate that the investment share leads the rate of utilization, or that these cycles are clockwise. These results raise questions about the key mechanism underlying supermultiplier theory.
Subjects: 
Sraffian Supermultiplier
Cyclical Growth
(Induced) Investment
Desired Rate of Capacity Utilization
JEL: 
E12
E24
E25
E32
Document Type: 
Working Paper

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