Two Classics: Böhm-Bawerk's Positive Theory and Fisher's Rate of Interest Through Modern Prisms

1994 ◽  
Vol 16 (2) ◽  
pp. 202-228 ◽  
Author(s):  
Paul A. Samuelson
Keyword(s):  
Interest Rate ◽  
Time Preference ◽  
Positive Theory ◽  
Interest Theory ◽  
Net Productivity ◽  
The Interest Rate

Positive Theory of Capital (1889) is a classic which contains Eugen von Böhm-Bawerk's 1889 correct vision of how the interest rate might be determined by the interplay of systematic time preference (“impatience”) and time-phased technology's productivity. But he was not quite able to formulate his intuitive vision in terms that would satisfy today's persnickety jury of theorists. And indeed the classic Rate of Interest (1907) by his younger contemporary, Irving Fisher, seemed to be disagreeing with Böhm-Bawerk's treatment of time's net productivity; but, as Fisher was unable to make clear until 1930, he was objecting only to Böhm-Bawerk's formulation of the role of productivity in interest determination. In point of fact, Fisher, who was so long identified (wrongly, but understandably) as an “impatience theorist,” considered his own main contribution to interest theory to be his clarification of how the technological superiority of time-consuming processes cooperated in the determination of the equilibrium interest rate.

Three Ways to Determine the Discount Rate

2012 ◽  
Author(s):  
Christian Gollier
Keyword(s):  
Interest Rate ◽  
Time Preferences ◽  
Classical Economics ◽  
Investment Opportunities ◽  
The Interest Rate ◽  
Period Model ◽  
Consumption Saving ◽  
Competitive Economy

This chapter presents the simple two-period model that is used in classical economics textbooks to examine the problem of consumption, saving, and investment in a competitive economy. This model is a reminder of the key role of the interest rate for the determination of economic growth. Its equilibrium level balances the demand and the supply of liquidity, which are themselves characterized by time preferences and investment opportunities. From a simple arbitrage argument, any new investment opportunity in the economy should be evaluated by using the interest rate as the rate at which the future benefits of the project should be discounted.

scholarly journals Does the Interest Rate Form Business Cycle?

2019 ◽  
Vol 4 (1) ◽  
pp. 29-34
Author(s):  
Bijan Bidabad ◽  
Abul Hassan
Keyword(s):  
Interest Rate ◽  
Business Cycle ◽  
Interest Rates ◽  
Banking System ◽  
Real Economy ◽  
Short Term ◽  
The Usa ◽  
Rate Form ◽  
The Interest Rate

Dynamic structural behavior of depositor, bank and borrower and the role of banks in forming business cycle are investigated. We test the hypothesis that does banks behavior make oscillations in the economy through the interest rate. By dichotomizing banking activities into two markets of deposit and loan, we show that these two markets have non-synchronized structures, and this is why the money sector fluctuation starts. As a result, the fluctuation is transmitted to the real economy through saving and investment functions. Empirical results assert that in the USA, the banking system creates fluctuations in the money sector and real economy as well through short-term interest rates

scholarly journals Pengaruh diferensiasi produk terhadap volume penjualan pada home industri “Jenang Mirah” Josari Ponorogo

2017 ◽  
Vol 5 (1) ◽  
pp. 81
Author(s):  
Pega Saputra
Keyword(s):  
Interest Rate ◽  
Time Series Data ◽  
Alternative Hypothesis ◽  
Linear Regression Analysis ◽  
Coefficient Of Determination ◽  
Series Data ◽  
Simple Linear Regression ◽  
The Interest Rate ◽  
Descriptive Method

<p><em>This study describes the influence of SBI interest rate on the rupiah at Bank Indonesia studies. The method in this research is descriptive method with quantitative approach. Determination of the sample is based on time series data 2009-2015 period by using saturation sampling methods as many as 84 samples. This research was conducted at Bank Indonesia has the sole purpose of achieving and maintaining stability in the rupiah. This study uses simple linear regression analysis which includes the classical assumption and hypothesis testing in the form of the coefficient of determination (r</em><em>2</em><em>) and the partial test (t test). The results showed that the interest rate significantly influence the exchange rate. that the null hypothesis is rejected and the alternative hypothesis is accepted.</em></p>

scholarly journals Taxes and the Structure of Production

1998 ◽  
Vol 16 (2) ◽  
pp. 145-159 ◽  
Author(s):  
Walter Block
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Interest Rate ◽  
Business Cycle ◽  
Time Preference ◽  
Causal Relation ◽  
Austrian Business Cycle ◽  
The Business Cycle ◽  
The Interest Rate ◽  
Structure Of Production

Abstract In Austrian theory, the business cycle is caused by expansive monetary policy, which artificially lowers the interest rate below equilibrium rates, necessarily lengthening the structure of production. Can tax alterations also cause an Austrian business cycle? Only if they affect time preference rates, the determinant of the shape of the Hayekian triangle. It is the contention of this paper that changes in taxes possibly can (but need not) impact time preference rates. Thus there may be a causal relation between fiscal policy and the business cycle, but this is not a necessary connection, as there is between monetary policy and the business cycle. This is contentious, since some Austrians argue that there is a praxeological link between tax policy and time preference rates.

scholarly journals Access to Banking and the Role of Inequality and the Financial Crisis

2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Mauro Caselli ◽  
Babak Somekh
Keyword(s):  
Interest Rate ◽  
Financial Crisis ◽  
Financial Services ◽  
Income Disparities ◽  
Consumer Population ◽  
Alternative Financial Services ◽  
The 2008 Financial Crisis ◽  
The Interest Rate ◽  
Distribution Of Income

Abstract We study access to banking and how it is related to banks’ rate of return on investments and the distribution of income. We develop our empirical framework through a theoretical supply-side model of bank deposit services with a consumer population heterogeneous in income. We use this model to show how decreases in the interest rate margin and higher income disparities lead to an increase in the proportion of unbanked. Using localized US household data from 2009, 2011, 2013 and 2015 we find strong empirical evidence for the predictions of the model. We then structurally estimate our model to estimate the value of having a checking account relative to alternative financial services and to quantify the effects of actual changes in the interest rate margin and the distribution of income that occurred in the aftermath of the 2008 financial crisis.

scholarly journals The price puzzle and the role of South African monetary policy in Botswana and Namibia

2012 ◽  
Vol 5 (1) ◽  
pp. 193-214
Author(s):  
Philippe Burger ◽  
Helvi Fillipus ◽  
Innocent Molalapata
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
South African ◽  
Reaction Functions ◽  
Transmission Mechanisms ◽  
Price Puzzle ◽  
The Interest Rate ◽  
Monetary Transmission Mechanisms ◽  
Interest Rate Shock

Using SVAR analysis, this paper finds what Sims calls a ‘price puzzle’, i.e. a case where CPI increases after a positive interest rate shock. The SVAR analysis controls for various monetary transmission mechanisms, including one based on the South African dominance hypothesis that links South African monetary policy to inflation in Botswana and Namibia. The paper follows Castelnuovo and Surico and interprets the price puzzle as a symptom of an indeterminate monetary policy. Subsequently the paper explores the finding of indeterminate monetary policy further by using an unstructured VAR to estimate the monetary reaction functions of Botswana and Namibia. These results also point to the presence of an indeterminate monetary policy. Lastly, both the SVAR and the unstructured VAR estimated for the monetary reaction function indicate the importance of the exchange rate, and not the interest rate, as a determinant of inflation in both Botswana and Namibia

scholarly journals PERBANDINGAN PENGARUH SUKU BUNGA DAN INFLASI TERHADAP KREDIT DAN PEMBIAYAAN (Studi Kasus pada Bank Umum Konvensional dan Bank Umum Syariah periode 2011-2015)

IQTISHODUNA ◽  
2017 ◽  
Vol 12 (2) ◽  
pp. 91-97
Author(s):  
Hasannudin Nursalim Putra ◽  
Irnin Miladyan Aryq ◽  
Lilik Jazilatul Mufidah
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Path Analysis ◽  
The State ◽  
Financial Policy ◽  
The Third ◽  
The Interest Rate ◽  
Policy Interest

Inflationary pressures that often time there was a can shake economy the state, to face inflationarypressures one of the efforts of the country to control the inflation is by issuing policy interest rate by theIndonesia bank as central financial policy monetary and fiscal. The banks have the role of to control the rateinflation. The interest rate that set by the bank will affect the level distribution credit of bank conventional andfinancing of sharia bank. For that researchers want to see the influence of direct and indirect interest rates tocredit and financingand inflation as variable intervening. The kind of research is quantitative with the sampleof six general Sharia Bank and the generalconventional bank in Indonesia period 2011 until 2015 taken withpurposive sampling. Themethod is path analysis. Based onsignificant test, the first significant test has resultthat interest rates significant of inflation. Thesecond significant testhas results that the interest rate notsignificant on the distribution credit and financing. The third significant test has result that inflation is notsignificant to distribution credit and financing. So this is can concluded that inflation will not be variableintervening for the distribution credit and financing.

WICKSELL ON WALRAS’S EARLY TREATMENT OF CAPITAL AND INTEREST

2018 ◽  
Vol 40 (1) ◽  
pp. 41-56 ◽  
Author(s):  
Andrea Imperia ◽  
Vincenzo Maffeo ◽  
Fabio Ravagnani
Keyword(s):  
Nineteenth Century ◽  
Interest Rate ◽  
Production Process ◽  
Early Treatment ◽  
Social Production ◽  
Small Circle ◽  
The Social ◽  
The Interest Rate

In this paper we examine the criticism that Knut Wicksell advanced against Léon Walras’s treatment of capital and interest at the end of the nineteenth century, as well as the views of two distinguished followers of Walras concerning the points raised by the Swedish economist. As regards the first aspect, it should be noted that the criticism put forward by Wicksell at that time refers to the earlier editions of the Éléments, in which circulating capital is excluded from the analysis. We thus endeavor to clarify Wicksell’s remarks on the consequences of that exclusion for both the representation of the social production process and the determination of the interest rate. As to the second aspect, our discussion indicates that the appropriate way of treating the capitalistic element of production was an unsettled issue within the small circle of Walras’s followers at the end of the nineteenth century.

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