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Federal Reserve Bank of St. Louis
Working Papers
Measuring interest rates as determined by thrift and productivity
Woon Gyu Choi
Yi Wen

This paper investigates the behavior of short-term real and nominal rates of interest by combining consumption-based and production-based models into a single general equilibrium framework. Based on the theoretical nonlinear relationships that link interest rates to both the marginal rates of substitution and transformation in a monetary production economy, we develop an estimation and simulation procedure to generate historical time series of interest rates. We find that the predictions of interest rates based on a general equilibrium theory are partially consistent with US data.

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Woon Gyu Choi & Yi Wen, Measuring interest rates as determined by thrift and productivity, Federal Reserve Bank of St. Louis, Working Papers 2005-037, 2005.
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Keywords: Interest rates
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