This paper tests the main postulates of the Sraffian supermultiplier model for the case of 16 European economies during the period 1995–2018. We adopt the methodology of Girardi and Pariboni (2016) and extend it to a panel framework. We apply panel unit root, cointegration, and causality tests that are robust to endogenous regressors, cross-sectional dependence and heterogeneity across countries. Our results are supportive of the Sraffian supermultiplier model. In a heterogeneous panel framework, autonomous demand and output follow a long-run equilibrium relationship and there exists panel long-run causality that goes unidirectionally from autonomous demand to output. We also empirically verify the investment accelerator (the mechanism that enables the dynamic stability of the model) by confirming the existence of same-sign panel causality running unidirectionally from the growth rate of autonomous demand to the investment share. Our results call for national economic policies aimed at promoting the components of autonomous demand that act as locomotives of growth in each country.

The tourism-led growth hypothesis (TLGH) has been the subject of hundreds of investigations. However, most of these investigations have limited themselves to empirically verify a dynamic relationship between tourism receipts and economic activity, leaving aside the theoretical background or the baseline economic growth model on which the TLGH could be built. With this in mind, the authors present a multiplier-accelerator growth model and state that it is a good option to analyze the TLGH. This model fits the TLGH, since its long-run equilibrium positions are analogous to the TLGH. However, multiplier-accelerator growth models generally suffer from dynamic instability. Therefore, the authors propose a model with an investment function that, by relating the acceleration of investment just to the “permanent” increases in demand, is able to replicate the “relative stability” of growth of tourism-based economies.

This paper studies the dynamic relationship between consumption and investment in the United States between 1947 and 2018. Our findings support the postulates of Keynesian economics-while they are contrary to the theoretic background on which the numerous empirical studies on the saving-investment nexus are based. We find a long-run nexus between consumption and investment, and positive linear Granger-causality running unidirectionally from consumption to investment. Therefore, investment is sustained by consumption. Further, we find that the variables have nonlinear structures and, thus, we apply nonlinear causality tests. We provide evidence of nonlinear causality running unidirectionally from consumption to investment. Nevertheless, after controlling for Government Expenditure, this nonlinear causal relationship disappears, indicating that Government Expenditure drives the nonlinear causal relationship between private consumption and investment. We argue that this finding is consistent with the notion that investment decisions are guided by permanent aggregate demand, because public expenditure allows private consumption to have a sufficiently permanent trajectory to be considered as a guide for investment decisions. Our results do not support the austerity and deflation measures implemented in the last years (especially in the European Union). On the other hand, our findings call for the incentive of final public expenditure, since it favours the long-run link between the private decisions to consume and invest.

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The authors would like to make the following corrections to the published paper [...]