Effekte des Geldmarktzinses auf die Preis- und Produktivitätsentwicklung. Eine Analyse der deutschen Volkswirtschaft 1970-2014

Effects of the money market interest rate on the development of prices and productivity: An analysis of the German economy 1970-2014

MPRA Paper from University Library of Munich, Germany

Abstract: The European Central Bank is doing all it can to prevent deflation and to push inflation at the mark of two percent annually; it is currently not successful. Instead of reaching that goal, unintended side effects can be observed and new risks are evolving. Some people surmise that low interest rates on capital markets damage the productivity of an economy. This raises the question of why consumer prices have not started to rise. Standard models of neo-classical synthesis give an unambiguous answer: there is no demand as a result of a growing economy in Europe. The neo-classical paradigm is open to further, potentially more precise answers. Some people hypothesize that inflation will not come before the amount of consumption by the rich rises considerably. Both hypotheses – (i) a negative effect of low interest rates on productivity and (ii) luxurious consumption as a driver of prices – would be a surprising enrichment of the macroeconomic theory. The development of the German economy from 1970 – 2014 confirms the standard models, but not those supplementary theories.

Keywords: European Central Bank’s inflation goal; effects of low interest rates; testing the Austrian business cycle theory and parts of the neo-classical IS-LM-model (search for similar items in EconPapers)
JEL-codes: B53 E13 E31 (search for similar items in EconPapers)
Date: 2016-02-19
New Economics Papers: this item is included in nep-mac
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