Disproving Wicksell’s Theory of Interest
5 Pages Posted: 29 Nov 2013 Last revised: 10 Jun 2016
Date Written: November 29, 2013
Abstract
This paper disproves Wicksell’s theory of interest rate. It shows that his theory rests on four unrealistic assumptions. A standard isoquant derives contrary conclusions from Wicksell’s: that a drop of interest rate does not raise wage rate, and that a drop of interest rate reduces quantity demanded for labor.
Keywords: Interest rate, Money, Inflation
JEL Classification: E43, E31
Suggested Citation: Suggested Citation
Choi, Hak, Disproving Wicksell’s Theory of Interest (November 29, 2013). Available at SSRN: https://ssrn.com/abstract=2361197 or http://dx.doi.org/10.2139/ssrn.2361197
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