ABSTRACT
The predominant view on the issue of interest rate determination – widely inspiring economic policies of the past and the present – is that a rise in (private or public) investment raises interest rates, whereas an act of (private or public) thrift lowers them. And since virtually all modern macroeconomic models feature “the” rate of interest as being determined – in equilibrium – by technology on the one hand and agents’ time preferences on the other, this view would seem to be well-founded in economic theory.
