Die Determinanten des Zinsniveaus in der Bundesrepublik Deutschland

Abstract

The Determinants of the Interest Level in the Federal Republic of Germany. A Commentary

The empirical results obtained by Siebke and Willms concerning the determinants of the level of interest rates in the Federal Republic of Germany are in the main untenable. Not only the fact that the extended test equation used by the authors on account of the interdependence of the “independent” variables permits no reliable isolation of a price expectation, an income and a liquidity effect plays a contributory part in reaching this judgment. Also the estimation of the individual effects themselves gives grounds for criticism. For example, this reviewer’s own comparative calculations show that the price expectation effect under the empirical procedure selected by the authors extends over amarkedly longer period of time. The scrutiny that was undertaken suggests - in agreement with more recent research results -that the “adaptive expectation hypothesis” used by Siebke and Willms as an. approximation of the actual price expectations should be rejected. Tiheoretical and empirical alternatives are available for taking expectations into account. In calculating theincome effect, Siebke and Willms fail to take account ofa time lag, although they expresslydraw attention to the temporal aspect in their theoretical .deliberations. Furthermore, the nominal gross national product used has an income and a price component andcan therefore - in view of the simultaneous estimation of a price expectation effect - not be used alone for any unequivocal statement on the income effect. In the case of the liquidity effect, too, the authors refrain from computing time lags. Therefore their comparative statements on the relative significance of the liquidity and the income effect over time are not convincing. Moreover, their measure of the liquidity effect, the nominal quantity of money, is empirically and theoretically vulnerable. This is confirmed by this reviewer’s own calculations, which are more specifically based on conditions in the Federal Republic of Germany