format_quote Originally Posted by
steve
Hi I was wondering if someone could help me with the following question. To what extend if any would the absence of interest change the multiplier effect of Keynesian economics?
At my Quantitatve Methods lecture the professor was saying that the "Fall of Keynesian Theory" (wrt fiscal policy dependency) came when statistics showed that it had a measly 0.06 probabilty or something like that of shaking up the economy as opposed to Milton Freeman's Monteray policy mentality which had a probability of 0.49 or something like that (don't quote me on the numbers but i can tell u that Monetary policy definatley atleast had more than a 20 fold effect on the economy compared to Fiscal)
ill ask my friend for the lecture notes if he's still got them n ill get back 2u with the exact figures.
One of the politicians actually labelled it "a beautiful set of numbers" lol.
Based on that... it makes sense that the Multiplier effect would undergo a relatively bigger change if interest rates are adjusted compared to contracting or expanding government spending.
From the outset it might seem that "interest is the way to go", but there's a tonne of underlying dynamics which can be influenced to make up, going down all teh way to the currency used in the economy (hint hint, gold stadnard)
Allahu A'3lam tho :)
salams