Interest rates and investment in West Germany
Causality tests due toGranger ,Pierce/Haugh , and analysis of residuals from Box-Jenkins models are applied to investment, three interest rate series, and output for West Germany from 1960 to 1978. Results are reported for two separate periods which are distinct due to changes in government policies.
We conclude that investment is inelastic with respect to nominal short-term interest rates and the real rate of interest. However, investment does appear influenced by nominal long-term interest rates, even after government policies had moved towards controlling money stock rather than operating directly on interest rates.
KeywordsInterest Rate Real Rate Money Stock German Industry Central Bank Money
Unable to display preview. Download preview PDF.
- Box, G.E.P., andG.M. Jenkins: Time Series Analysis, Forecasting and Control. San Francisco 1970.Google Scholar
- Irmler, M.: The Deutsche Bundesbank's Concept of Monetary Theory and Policy. Proceedings of the First Konstanzer Seminar on Monetary Theory and Policy, supplement to Kredit and Kapital. Ed. by K. Brunner. 1972, 137–164.Google Scholar
- Leijonhufvud, A.: On Keynesian Economics and the Economics of Keynes. Oxford 1968.Google Scholar
- Richter, R., P.C. McMahon, andH.J. Regier: Determinants of Free Liquid Reserves in the Federal Republic of Germany 1960–1972. Zeitschrift für die gesamte Staatswissenschaft134, 1978, 686–702.Google Scholar
- Schwert, W.G.: Tests of Causality; The Message in the Innovations. Proceedings of the Carnegie Rochester Public Policy Conference, supplement to the Journal of Monetary Economics. Ed. by K. Brunner and A. Meltzer. 1979, 55–96.Google Scholar
- Sims, C.A.: Money, Income and Causality. American Economic Review62, 1972, 540–552.Google Scholar
- Streissler, E., andG. Tichy: Die Transmission Monetärer Impulse über den Kreditmarkt. Probleme der Geldmengensteuerung. Ed. by W. Ehrlicher and A. Oberhauser. Berlin 1978, 145–195.Google Scholar
- Zellner, A.: Causality and Econometrics. Proceedings of the Carnegie Rochester Public Policy Conference, supplement to the Journal of Monetary Economics. Ed. by K. Brunner and A. Meltzer. 1979, 9–54.Google Scholar