Accelerator, financial (financial accelerator)

When the central bank increases the money supply and the interest rate falls as a result, CETERIS PARIBUS (among other things: when expectations are positive) investors and the government expand demand. – More orders reach upstream suppliers; – their self-financing capabilities and thus their creditworthiness (Borg strength) increase. – The result is an amplification of cyclical swings. – However, since there are more financially constrained companies in a recession than in a boom, this financial accelerator usually has a stronger effect in an economic downturn than in a boom. – See bear market, cyclical, insolvency cases, credit constraint carousel, values, cyclical. – Cf. Monthly Report of the Deutsche Bundesbank of July 2002, pp. 47 f., Monthly Report of the Deutsche Bundesbank of March 2005, pp. 16 ff. (with empirical studies).

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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