Investment and the Rate of Interest
Journal of Political Economy
1971
The purpose of this paper is to present a coherent view of the neoclassical model of capital accumulation as a basis of for a theory of investment of the firm. The model is formulated in discrete time, which brings out more clearly than the usual continuous-time version the crucial distinction between the short and the long run. In the long run there can be no stable relationship between investment and the rate of interest. However, in the short run there does exist a determinate relationship between investment and the rate of interest, and this is consistent with the Keynesian hypothesis.
- DOI
- 10.1086/259839
- Volume
- 79 (6)
- Pages
- 1335-1345
- Language
- en
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