Disproving Wicksell’s Theory of Interest

5 Pages Posted: 29 Nov 2013 Last revised: 10 Jun 2016

See all articles by Hak Choi

Hak Choi

Chienkuo Technology University - Department of International Business; Chung-Hua Institution for Economic Research

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

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

Hak Choi (Contact Author)

Chienkuo Technology University - Department of International Business ( email )

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Taiwan
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Chung-Hua Institution for Economic Research ( email )

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Taipei
Taiwan

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