GARCH Analyses of Risk and Uncertainty in the Theories of the Interest Rate of Keynes and Kalecki

By: Gabrisch, Hubert.

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BookSeries: wiiw Working Papers: 191Publisher: Wien : Wiener Institut für Internationale Wirtschaftsvergleiche (wiiw), 2021Description: 25 S., 7 Tables and 2 Figures, 30cm.Subject(s): uncertainty | interest rate | Keynes | Kalecki | GARCHCountries covered: Canada | Euro Area | Germany | Japan | United Kindom | USwiiw Research Areas: Macroeconomic Analysis and PolicyClassification: B26 | C58 | E43 | E47 Online resources: Click here to access online Summary: This study attempts to identify uncertainty in the long-term rate of interest based on the controversial interest rate theories of Keynes and Kalecki. While Keynes stated that the future of the rate of interest is uncertain because it is numerically incalculable, Kalecki was convinced that it could be predicted. The theories are empirically tested using a reduced-form GARCH-in-mean model assigned to six globally leading financial markets. The obtained results support Keynes’s theory – the long-term rate of interest is a nonergodic financial phenomenon. Analyses of the relation between the interest rate and macroeconomic variables without interest uncertainty are thus seriously incomplete.

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Item type	Current library	Call number	Status	Date due	Barcode
Paper	WIIW Library	5.700/191 (Browse shelf(Opens below))	Available		1000010005485

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This study attempts to identify uncertainty in the long-term rate of interest based on the controversial interest rate theories of Keynes and Kalecki. While Keynes stated that the future of the rate of interest is uncertain because it is numerically incalculable, Kalecki was convinced that it could be predicted. The theories are empirically tested using a reduced-form GARCH-in-mean model assigned to six globally leading financial markets. The obtained results support Keynes’s theory – the long-term rate of interest is a nonergodic financial phenomenon. Analyses of the relation between the interest rate and macroeconomic variables without interest uncertainty are thus seriously incomplete.

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