The Maximum Interest Rate on an Unbalanced Growth Path
Abstract In a steady-state economy, an interest rate that is larger than the maximum growth rate would lead to an inconsistent price system. We identify a similar condition for a multisectoral economy off the steady state: If persistent inflation is to be avoided, the interest rate must not be larger than the maximum growth rate of a feasible subtechnology that is capable of covering final demand.
|Date of creation:||Dec 2000|
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