Revisiting the accelerator principle in a world of uncertainty: Some empirical evidence |
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| Institution: | 1. Department of Land Economy, University of Cambridge, Cambridge CB3 9EP, United Kingdom;2. Cambridge Econometrics, Cambridge CB1 2HT, United Kingdom;1. Brunel University, London, United Kingdom;2. University of Navarra, Pamplona, Spain;1. Department of Economics, 3133 Sproul Hall, University of California, Riverside, CA 92521, USA;2. Department of Economics and Related Studies, University of York, Heslington, York YO10 5DD, UK |
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| Abstract: | This contribution builds on the accelerator model to produce an investment function in which employment and households' investment are used as proxies for economic activity. This analysis identifies a positive correlation between corporate investment in fixed assets and households' investment in dwellings. Using a panel of 11 OECD countries for the period 1970–2010, the results also confirm that oil prices and interest rates may dampen firms' investment in fixed assets. An interesting feature of this investment function is that it accounts for uncertainty. |
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