Is the supermultiplier stable?
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Date
2024-05-17
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Citation of Original Publication
Thompson, Stephen. “Is the Supermultiplier Stable?” Metroeconomica (17 May 2024):1-25. https://doi.org/10.1111/meca.12464.
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This is the pre-peer reviewed version of the following article: Thompson, Stephen. “Is the Supermultiplier Stable?” Metroeconomica (17 May 2024):1-25. https://doi.org/10.1111/meca.12464, which has been published in final form at https://doi.org/10.1111/meca.12464. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions.
Abstract
Supermultiplier models, which show how autonomous demand can drive both business cycles and long-run GDP growth, are based on a stability assumption. In this paper I look at recent efforts to justify this assumption, and argue that they are not convincing. The supermultiplier literature generally assumes that business investment reacts very slowly to changes in the state of the economy, but faster adjustment speeds are consistent with US data and can generate instability.