goodwin

goodwin - HAKAN YILMAZKUDAY EC 601 ECONOMIC GROWTH LECTURE...

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HAKAN YILMAZKUDAY EC 601 ECONOMIC GROWTH LECTURE NOTES WEEK 8 GOODWIN’S NONLINEAR ACCELERATOR MODEL Cycles are generated and maintained by structurally unstable parameter values in the accelerator model of Samuelson (1939), which has linear dynamic structures. However, linear structures are often adopted because they are simple and the results they yield are simple. As a result, many economists have claimed that non-linear structures should be employed instead. Because, non-linear dynamic structures bring more general and common explanations to business cycles. Moreover, only working with linear models limits some types of dynamics that are possible. One of the first formal non-linear models of the cycle was presented by Richard Goodwin (1951) in a model similar in spirit to the Harrod-Hicks multiplier- accelerator model, but entirely different in structure. The main difference was that Goodwin's accelerator was non-linear, which enabled him to obtain cycles for any parameter constellation and without exogenous ceilings, floors, or shocks. Goodwin's 1951 article was more an illustrative exercise of the importance of non- linearity rather than an attempt at a comprehensive theory of the trade cycle. Goodwin (1951) clarifies the importance of using non-linear models in the explanation of business cycles as follows. “Almost without exception economists have entertained the hypothesis of linear structural relations as a basis for cycle theory. As such it is an oversimplified special case and, for this reason, is the easiest to handle, the most readily available. Yet it is not well adapted for directing attention to the basic elements in oscillations – for these we must turn to nonlinear types.
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This note was uploaded on 01/11/2012 for the course ECO 601 taught by Professor Hakanyilmazkuday during the Fall '11 term at FIU.

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goodwin - HAKAN YILMAZKUDAY EC 601 ECONOMIC GROWTH LECTURE...

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