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Thrift, Productivity and the Real Rate of Interest in Australia

Author

Listed:
  • Hawtrey, K. M.

    (Macquarie University)

Abstract

In a small open economy, it is common to regard the domestic interest rate as a function of the world rate plus a local risk premium. At the same time. Irving Fisher's longstanding theory of the real interest rate emphasises the twin domestic forces of consumer thrift and producer productivity. This paper tests for a relationship between the Fisher variables and Australia's real interest rate. It is found that these two variables explain well the observed stationarity of the Australian real rate of interest since the early 1980s, indicating that thrift and productivity provide a robust theoretical framework for the macroeconomic factors that determine the risk premium. 2 downloads: http://www.eap-journal.com.au/download.php?file=362 and http://www.eap-journal.com.au/download.php?file=363

Suggested Citation

  • Hawtrey, K. M., 1999. "Thrift, Productivity and the Real Rate of Interest in Australia," Economic Analysis and Policy, Elsevier, vol. 29(2), pages 151-171, September.
    • Handle: RePEc:eee:ecanpo:v:29:y:1999:i:2:p:151-171
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    More about this item

    Keywords

    Consumer; Interest Rates; Interest; Productivity;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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