An Extended Nonlinear Hicks Model of the Cycle for a Semi-Open Economy: Application to the USA (1960-2008)

This paper presents both an extended nonlinear Hicks model of the cycle for a semi-open economy and a method for deriving estimators based on Nonlinear Least Squares as a Numerical Optimization Problem. Hicks thought that fluctuations in investment, caused by nonlinear changes in autonomous investment and the acceleration principle governing induced investment, led to an adjustment process taking place throughout many periods. An empirical application for the US economy (1960-2008), demonstrates the validity of the model and its almost ideal fit to real world data.