Senge, Peter M.,"A Long-Wave Theory of Real Interest Rate Behavior", 1984
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Businessmen, bankers, private citizens, and government officials share deep concerns over the high values of interest rates in today’s economy. Of particular concern has been real interest rate, the rate of interest adjusted for inflation. Although nominal interest rates have followed a generally declining trend over the past year, this decline has generally lagged declining inflation and has failed to keep pace with the drop in inflation. This paper is the first of two on the problem of high real interest rates. It focuses on developing a theoretical framework for understanding the role played by real interest rates in the long wave. The second part of the study will focus on the effects of government deficits and alternative monetary policies. The primary purpose of this study is to show that the downturn of the long wave can cause rising real interest rates even with no government deficit or change in monetary policy.