Econometrica: May, 1983, Volume 51, Issue 3

The Multivariate Flexible Accelerator Model: Its Empirical Restrictions and an Application to U.S. Manufacturing

https://doi.org/0012-9682(198305)51:3<647:TMFAMI>2.0.CO;2-D
p. 647-674

Larry G. Epstein, Michael G. S. Denny

This paper derives an exhaustive set of restrictions implied by the multistock flexible accelerator specification of the adjustment-cost model for the firm. The flexible accelerator specification of the demand for capital and labor is estimated using U.S. manufacturing annual data for the 1947-1976 period. The consistency of the data with the model is examined by testing the validity of the derived restrictions. Finally, the conditions which permit aggregation over firms are determined and tested empirically.