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A Note on Dynamic Multipliers

Robert Solow

Abstract

Methods are given for calculating the effect on the stability of a pure multiplier system of certain simple kinds of shifts in the lag pattern of consumption responses. In particular, other things being equal (and the "other things" must be specified in detail), increases in average lag slow up the rate of return to equilibrium after disturbance. Increased dispersion of the timing of consumption responses has the same effect; thus a lengthening of the average lag combined with a concentration of the lag pattern may have a combined result going either way. Of course, any approximately realistic shift in the consumption lag distribution, such as might result from a change in the amount of terms of instalment credit, would not be of the simple type treated here. However, fairly general variations might be approximated by a combination of one-sided and symmetric displacement as discussed below.