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

Lucian Albu ()

MPRA Paper from University Library of Munich, Germany

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.

Keywords: Investment; GDP Growth; Interest Rate; Depreciation Rate; Contour Plot (search for similar items in EconPapers)
JEL-codes: C51 E22 E27 P24 (search for similar items in EconPapers)
Date: 2010-06-03
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Citations: View citations in EconPapers (2)

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