Journal of Economic Dynamics & Control 31 (2007) 575–592 The Hicksian trade cycle with floor and ceiling dependent on capital stock To¨nu Puu à Centre for Regional Science (CERUM), Umea University, SE-90187, Umea, Sweden Received 28 April 2005; accepted 13 December 2005 Available online 15 March 2006 Abstract This article reconsiders the Hicksian multiplier – accelerator model with ‘floor’ and ‘ceiling’. The new thrust is that these constraints are tied to the actual stock of capital, the floor to the depreciation on this stock, the ceiling to capital as a limiting production factor according to the fixed proportions technology that also underlies the principle of acceleration. For capital formation just the Hicksian investment theory is used. The result is one unified model creating economic growth and growth rate cycles. r 2006 Elsevier B.V. All rights reserved. JEL classification: E32 Keywords: Business cycle models; Multiplier – accelerator models; Floor–ceiling models; Complex dynamics 1. Introduction This article reconsiders the Hicksian trade cycle model with ‘floor’ and ‘ceiling’, through tying both to the stock of capital. To include the stock of capital in the model calls for no new elements, alien to the basic model, because the Hicksian model already contains a theory for capital formation. This is so, as there is a theory ARTICLE IN PRESS www.elsevier.com/locate/jedc 0165-1889/$ - see front matter r 2006 Elsevier B.V. All rights reserved. doi:10.1016/j.jedc.2005.12.004 à Tel.: +46 90 786 9819; fax: +46 90786 5121. E-mail address: tonu.puu@econ.umu.se.