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After the global financial crisis of 2008-2009, the governments of the world are piling up deficits to close the saving-investment gap in the private sector. The governments cannot accumulate deficits… Click to show full abstract
After the global financial crisis of 2008-2009, the governments of the world are piling up deficits to close the saving-investment gap in the private sector. The governments cannot accumulate deficits endlessly so that they must urg ently promote the investments in the private industries. It is obvious that lowering the market rate of interest is one of the best policies to boost the capital investment. The probl em is that what inflation rate they have in their mind when the entrepreneurs make investmen t d cisions. Not only the output prices, but also the composition of inputs and thei r prices differ from one industry to another. Therefore, the value added deflator or eve n th operating surplus deflator for each industry are better alternative to calculate t he real interest rate. JEL Classification: C43, C67, E31
Journal Title: Statistical journal of the IAOS
Year Published: 2017
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