The Equality of the Natural Rates of Interest, Inflation and Economic growth, and Its Implications for Monetary Policy

Costa, André (2025): The Equality of the Natural Rates of Interest, Inflation and Economic growth, and Its Implications for Monetary Policy.

Abstract

This paper considers the role of savings as that of managing the tradeoff between the amount consumed of present varieties and the investment into improving the quality of varieties in the future. Under this framework, it is shown that the rates of interest, inflation and economic growth are equal and derived from the same phenomenon: innovation. Consequently, this leads to a monetary policy recommendation, namely to attempt to bind the rates of inflation and interest to the directly observable real rate of economic growth.

• Item Type: MPRA Paper
• Language: English
• Keywords: Growth theory
• Subjects: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E20 - General; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E21 - Consumption ; Saving ; Wealth; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E22 - Investment ; Capital ; Intangible Capital ; Capacity; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E40 - General; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E43 - Interest Rates: Determination, Term Structure, and Effects; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E50 - General; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy

References

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