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The role of adjusment costs in interest rate determination

Author

Listed:
  • Alfonso Novales Cinca

    (Departamento de Fundamentos del Análisis Económico II (Economía Cuantitativa))

Abstract

We study in this paper the equilibrium influence of adjustment costs of capital on interest rates determination. Considering endogenous interest rates in optimal capital accumulation models introduces nonlinearities which together with expectations of future variables make the model hard to analyze. We use here a solution method that has recently been preposed in the literature, to show that the model is able to reproduce some of the correlations among output, consumption, interest rates and capital that can be observed in actual time series data.

Suggested Citation

  • Alfonso Novales Cinca, 1986. "The role of adjusment costs in interest rate determination," Documentos de trabajo de la Facultad de Ciencias Económicas y Empresariales 86-04, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales.
    • Handle: RePEc:ucm:doctra:86-04
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