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The Maximum Interest rate on an Unbalanced Growth Path

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  • Martin E. Diedrich

Abstract

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.
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Suggested Citation

  • Martin E. Diedrich, 1996. "The Maximum Interest rate on an Unbalanced Growth Path," Keele Department of Economics Discussion Papers (1995-2001) 96/3, Department of Economics, Keele University.
  • Handle: RePEc:kee:keeldp:96/3
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    JEL classification:

    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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