Kaldor, Hicks and Goodwin Meet the Supermultiplier: On Growth Cycles and Autonomous Demand

ABSTRACT This paper presents an approach to reconciling short‐run business cycles with long‐run growth in macroeconomic models. It addresses recent criticisms of supermultiplier models by developing a framework that combines investment‐driven cycles with autonomous demand‐led growth in the long run. The model builds on endogenous business cycle theories, incorporating a nonlinear accelerator mechanism and a dynamic multiplier to generate persistent cycles. By extending this canonical model to include growing autonomous demand, the paper demonstrates how persistent cyclical fluctuations in the rate of capacity utilization can coexist with a long‐run growth trend in output determined by autonomous demand. This integration of short‐run dynamics and long‐run growth aims to bridge the gap between traditional business cycle theories and modern growth models, providing a unified trend‐cum‐cycle framework. The paper contributes to the ongoing debate on the role of autonomous components of aggregate demand in shaping economic outcomes and offers a framework for further research on the interplay between cyclical fluctuations and trend growth.