A disaggregated SM in an input–output setting: application to the decarbonisation process

The aggregate multiplier and supermultiplier have a major shortcoming: they can only ask questions implying a balanced economic expansion. Otherwise, we are bound to assume that all the sectors share the same technology. To obtain an accurate answer when growth is unbalanced, we should start from input-output tables and compute “matrix” or disaggregate supermultipliers . Chapter 10 shows a particular way to achieve this goal. Matrix supermultipliers are used in the last section to analyse the decarbonisation process aimed at substituting fossil electricity with renewable ones. A caveat. If the investment in solar and wind parks is endogenised into the SM, the economy will destabilise soon. But this procedure is inappropriate. The replacement of installed capacity has the usual multiplier effects on induced consumption, not the accelerator effects on induced investment. The SM model limits the size of the elements included in the multiplicand at period t. Whenever this limit is respected, instability problems fade away.