Real interest rate reproach

The assertion that in the euro area, given the same nominal interest rate and a below-average inflation rate in one member country – such as Germany – the real interest rate for that member is above average and therefore inhibits growth. – This disadvantage is offset, however, by the fact that – the lower inflation rate results in an improvement in price competitiveness vis-à-vis the other participating countries and – thus gives rise to a real growth effect (probably overcompensating for the increase in the real interest rate). – See devaluation, fiscal, inflation differentials, growth, exchange rate effect, real. – Cf. Monthly Report of the Deutsche Bundesbank of December 2008, pp. 38 f. (Change in price competitiveness within the EMU states since 1999).

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
E-mail address: info@ekrah.com
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