Technological change and the U.S. real interest rate

Constantine Alexandrakis ()

Journal of Economics and Finance, 2014, vol. 38, issue 4, 672-686

Abstract: Economic theory predicts that the rate of technological growth exerts a positive influence on the real rate of interest. To test this hypothesis, I examine the relationship between the inflation-adjusted yield of the 90-day Treasury-Bill and two measures of innovation: the rate of growth of the stock of patents per worker and R&D spending relative to GDP. As theory predicts, from 1963 to 2008 the rate of interest responds positively to an increase in either measure. The point-estimates imply an elasticity of intertemporal substitution between one and two. The findings suggest that a change in the stance of monetary policy and a wave of innovation both contributed to the rise of real interest rates in the 1980s. Copyright Springer Science+Business Media New York 2014

Keywords: R&D; Patents; Real interest rate; Technological change; E43; O33; O47 (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1007/s12197-012-9246-7

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