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Může být přirozená úroková míra nulová? Neoklasický přístup
[Can the Natural Rate of Interest Be Zero? A Neoclassical Approach]

Author

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  • Pavel Potužák

Abstract

Very low real rates of interest observed in modern economies might be caused by the fact that the natural rate of interest declined to a zero level. This article shows that a zero or a negative natural interest can be explained by the Böhm-Bawerkian and neoclassical theory. Firstly, two senses of time preference are introduced in a discounted utility model, and key determinants of the zero interest rate on the side of time preference are discussed in detail. Secondly, a simple general equilibrium model with fixed intertemporal endowment is presented. Within this model, a decreasing shape of the income stream is identified as a major source of zero interest along with a low intertemporal elasticity of substitution in consumption. Even in the world of zero or negative natural interest, it might be optimal to be a lender. The last section focuses on the role of marginal productivity of capital in the model, stressing the role of this phenomenon on one side and time preference on the other in lowering the natural rate of interest to a zero level.

Suggested Citation

  • Pavel Potužák, 2016. "Může být přirozená úroková míra nulová? Neoklasický přístup [Can the Natural Rate of Interest Be Zero? A Neoclassical Approach]," Politická ekonomie, Prague University of Economics and Business, vol. 2016(1), pages 83-108.
    • Handle: RePEc:prg:jnlpol:v:2016:y:2016:i:1:id:1056:p:83-108
    DOI: 10.18267/j.polek.1056
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    References listed on IDEAS

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    More about this item

    Keywords

    time preference; natural rate of interest; intertemporal elasticity of substitution in consumption;
    All these keywords.

    JEL classification:

    • B13 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Neoclassical through 1925 (Austrian, Marshallian, Walrasian, Wicksellian)
    • B21 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Microeconomics
    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • B53 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Austrian
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects

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