 A Disequilibrium Model of the Interest RateRui Santos ()
No 18/2011, Working Papers from Universidade Portucalense, Centro de Investigação em Gestão e Economia (CIGE) Abstract: In the setting of a dynamic general equilibrium model we ask the following question: What happens if the interest rate is settled exogenously in a level that differs from the one which emerges from equilibria in the markets? Although the subject of the imposition of the interest rate by an external authority on a level that differs from the so called natural interest rate has recently attracted a lot of attention in the literature, the assumption of full general equilibrium has tended to be maintained throughout. The main contribution of this paper is that we allow explicitly for disequilibrium in markets as is the tradition in other economic models when the price is settled on a level above or below the equilibrium price. Our main conclusion is that an exogenously imposed interest rate drives the output of the economy to a level below the one that emerges from a general equilibrium without external intervention. Keywords: Interest rate; General equilibrium; Disequilibrium (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ris:cigewp:2011_018 Access Statistics for this paper More papers in Working Papers from Universidade Portucalense, Centro de Investigação em Gestão e Economia (CIGE) Universidade Portucalense – Economics and Management Department (CIGE – Centro de Investigação em Gestão e Economia), Rua Dr. António Bernardino de Almeida, 541-619, 4200 – 072 Porto, Portugal. Contact information at EDIRC. |
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