## What is the Wicksellian interest rate?

Wicksell described the natural rate in several ways. Specifically, he defined the natural rate as (1) the rate of interest that equates saving with investment; (2) the marginal productivity of capital; and (3) the rate of interest that is consistent with aggregate price stability.

## What is the Wicksell problem?

In Wicksell’s view the theory of capital and interest had to tackle two main problems: (1) it had to explain the origin and level of interest, that is, identify the factors that give rise to a positive rate of interest; and (2) it had to explain the origin and formation of capital (cf.

**What is the Wicksell spread?**

The Wicksellian spread – what exactly is it? In short, the Wicksellian spread is the 10-year BAA corporate bond yield less nominal GDP growth.

### Is money a veil?

The veil of money is the property assumed by some economists whereby money is a commodity like other commodities – such as oil or gold or food – as opposed to its having special properties.

### What are the main features of Wicksell’s theory?

Another important feature of Wicksell’s theory is his explanation of the general movements of the price level. This he does with the help of his new concept of ‘monetary equilibrium’. This monetary equilibrium is brought about by an equality between the ‘natural rate’ and the ‘money rate’ of interest.

**What is Wicksellian Differential?**

The Wicksellian Differential is derived from Knut Wicksell ‘s theory of interest and is an approximation of the extent of disequilibrium in an economy. Formula: Wicksellian Differential = Natural Rate of Interest – Money Rate of Interest

## What does Wicksell mean by equilibrium?

Wicksell argued in Interest and Prices that the equilibrium of a credit economy could be ascertained by comparing the money rate of interest to the natural rate of interest. In modern terminology this equates to comparing the cost of capital with the return on capital.

## What is the contribution of Warren Wicksell in economics?

Wicksell presented his ideas and analysis in his two important books—’Lectures on Political Economy’ and ‘Interest and Prices.’ He is specially known for his ideas and analysis of price movements, trade cycle and his interpretation of crisis.