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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]

Author

Listed:
  • Quaas, Friedrun
  • Quaas, Georg

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.

Suggested Citation

  • Quaas, Friedrun & Quaas, Georg, 2016. "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 price," MPRA Paper 69632, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:69632
    as

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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    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;
    All these keywords.

    JEL classification:

    • B53 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Austrian
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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