Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/89258
Authors: 
van Arkel, Roder
Vermeylen, Koen
Year of Publication: 
2013
Series/Report no.: 
Tinbergen Institute Discussion Paper 13-202/VI
Abstract: 
Champions of sustainable growth often call for more durable production technologies with less capital depreciation. As investment in more durable capital is encouraged by lower interest rates, we investigate whether policy makers can steer the economy towards a path with low interest rates in order to stimulate more durable capital formation. We study this question from the viewpoint of two different macroeconomic paradigms, with three different modeling strategies, and get three fundamentally different and even contradicting answers. As none of these paradigms can claim to be superior to the other one, we argue that all modeling strategies may yield valuable insights, which leads to nuanced and careful policy advice. The paper is therefore an illustration of the importance of methodological pluralism in addressing macro-environmental questions where the interest rat e takes center stage.
Subjects: 
interest rate
capital durability
depreciation rate
sustainability
methodological pluralism
JEL: 
B4
E22
E43
O44
Q5
Document Type: 
Working Paper

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