Home  Journals  Financial Analytics: Science and Experience  30(216) - 2014 August

Analysis of the possibility of payment of different interest rate levels

Available online: 6 August 2014

Subject Heading: ISSUES ON ECONOMICS

JEL Classification: 

Pages: 14-23

The subject of the research is the level of interest rates in the economy and the possibility of its payment. The article gives an estimation of the modern theory of interest, which assumes that the level of interest rates in the economy must be a certain positive value. Otherwise, the lender is not interested in credit operations, and he will not long for giving out cash at negative interest rate. The author provides a proof that from the outset, with respect of the money, any positive level of interest rates is overestimated. The borrowers in the first place do not have the capacity to pay that particular interest rate level. After presenting the appropriate evidence, the paper provides the high-profile assumption that it is impossible to reconcile with the modern understanding of percent as an economic category. The positive level of interest rates on the debt market seems so obvious, that to suggests otherwise is absolutely impossible. But this level of interest rates is too high, which means that this economic option is far from the optimal value. On the basis of the analysis presented in the article, it is necessary to rethink the modern theory of interest in terms of existence of not positive interest rate value levels on the free debt market. The author emphasizes that the further analysis in this area will significantly improve the efficiency of the economic system.

Keywords: percentage rate, interest rate, theory, level, positive rate

References:

1. Mishkin F. Ekonomicheskaya teoriya deneg, bankovskogo dela i finansovykh rynkov [Economics of Money, Banking & Financial Markets: a textbook]. Moscow, Aspekt Press Publ., 1999, 820 p.
2. Letter of the Central Bank of the Russian Federation “On the Change of the face value of the Russian currency units and price scale” of August 04, 1997 № 32. Vestnik Banka Rossii – Bulletin of Bank of Russia of August 08, 1997, no. 53.

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ISSN 2311-8768 (Online)
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