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Scenarios for post-crisis period based on a set of presumed changes in the interest rate – investment – GDP growth relationship

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  • Albu, Lucian-Liviu

Abstract

The interest rate and investment are among the central variables influencing the growth rate. Due to the complexity empirically demonstrated of the interest rate – investment – GDP growth relationship, last decades a growing concern over the modelling this relationship has increased attention among officials, politicians, and economists. Moreover, the actual global crisis seems to provoke new changes in the economic growth mechanism. Based on statistical data for last period, we try to build a set of partial models in order to investigate the interest rate - investment - growth rate relationship in case of EU members and in the same time to verify some hypotheses usually in standard economic literature. Applying such simple models derived from standard ones in our experiment we estimated their parameters in case of EU countries. The main two partial models are referring to the impact of investment on GDP growth rate and respectively to the relation between interest rate and investment. Moreover, an equation including inflation dynamics was taken into account. Finally, the derived global model demonstrates complex dynamics, moreover permitting to compute so-called natural rate of interest and other key-parameters for macroeconomic decisions.

Suggested Citation

  • Albu, Lucian-Liviu, 2010. "Scenarios for post-crisis period based on a set of presumed changes in the interest rate – investment – GDP growth relationship," MPRA Paper 32753, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:32753
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    References listed on IDEAS

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    1. Albu, Lucian Liviu, 2002. "Sustainability Function," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 5-14, June.
    2. Barro, Robert J, 1989. "The Ricardian Approach to Budget Deficits," Journal of Economic Perspectives, American Economic Association, vol. 3(2), pages 37-54, Spring.
    3. Nicolas Carnot & Vincent Koen & Bruno Tissot, 2005. "Economic Forecasting," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-00581-5, December.
    4. Albu, Lucian Liviu, 2008. "Strain and Inflation-Unemployment Relationship in Transitional Economies: A theoretical and empirical investigation," Working Papers of Institute for Economic Forecasting 081103, Institute for Economic Forecasting.
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    Cited by:

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    2. Mihaela SIMIONESCU, 2015. "Is Africa’s current growth reducing inequality? Evidence from some selected african countries," Computational Methods in Social Sciences (CMSS), "Nicolae Titulescu" University of Bucharest, Faculty of Economic Sciences, vol. 3(1), pages 68-74, June.

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    More about this item

    Keywords

    Investment; GDP Growth; Interest Rate; Depreciation Rate; Contour Plot;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • P24 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - National Income, Product, and Expenditure; Money; Inflation
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

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