Real Interest Rates, Intertemporal Prices and Macroeconomic Stabilization A Journey Through the History of Economic Thought
AbstractThe notion of a "real rate of interest" has been a centre of confusion in the history of economic thought. In neoclassical economics, real interest rates were designed as relative prices of contemporary and future goods and Böhm-Bawerk believed that misalignments were corrected by market forces, restoring the allocation of saving and investment as well as macroeconomic equilibrium. The intertemporal perspective in goods market analysis was modified in Wicksell and Keynes; the focus shifted to financial markets. According to the new Keynesian theory, monetary policy should be used to support intertemporal consumption smoothing. Because investment is neglected, this approach is unable to grasp the intertemporal coordination problem and delivers poor microfoundations for macroeconomic stabilization.
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Bibliographic InfoPaper provided by Department of Economics, University of Hohenheim, Germany in its series Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim with number 292/2007.
Length: 24 pages
Date of creation: Dec 2007
Date of revision:
Note: Text written in German
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Web page: http://www.uni-hohenheim.de/institution/institut-fuer-economics-11
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Zinsspannentheorie; Neukeynesianische Makroökonomik; Realzins;
Find related papers by JEL classification:
- E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
- B1 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-05-10 (All new papers)
- NEP-CBA-2008-05-10 (Central Banking)
- NEP-HIS-2008-05-10 (Business, Economic & Financial History)
- NEP-HPE-2008-05-10 (History & Philosophy of Economics)
- NEP-MAC-2008-05-10 (Macroeconomics)
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