Journal Article

The real rate of interest: a theoretical analysis

C Bliss

in Oxford Review of Economic Policy

Published on behalf of The Oxford Review of Economic Policy Ltd

Volume 15, issue 2, pages 46-58
Published in print June 1999 | ISSN: 0266-903X
Published online June 1999 | e-ISSN: 1460-2121 | DOI: http://dx.doi.org/10.1093/oxrep/15.2.46
The real rate of interest: a theoretical analysis

More Like This

Show all results sharing these subjects:

  • Economic Development and Growth
  • Public Economics
  • Political Economy
  • Public Policy

GO

Show Summary Details

Preview

A theoretical view of the real rate of interest, such as is provided by models of economic growth, is presented. That question is of compelling interest, even though the issues are so long-run as to be of little practical importance. Models reviewed include the Solow model, and its disaggregated extension by Stiglitz; endogenous growth models; the Ramsey model; and the Diamond capital model. All these models are less than fully adequate to answer key questions. Solow-type models are good at demonstrating the influence of grand changes, such as alterations in saving rates, or demographic changes. However key variables - particularly the saving rate - are treated as constants. The Ramsey model, on the other hand, assumes in effect that a major influence on the real rate is a given impatience parameter. The Diamond model is ideal for economies dominated by pension fund saving, but does not describe any actual economy.

Journal Article.  0 words. 

Subjects: Economic Development and Growth ; Public Economics ; Political Economy ; Public Policy

Full text: subscription required

How to subscribe Recommend to my Librarian

Users without a subscription are not able to see the full content. Please, subscribe or login to access all content.