In some of our other work, we have focussed on the importance of the relationship between the rate of growth (g) and the real interest rate (r), and we take the view that macroeconomic management becomes much more difficult if r rises above g. Another of our main conclusions is that g, the rate of growth of real output, must decline, as the growth of the workforce slows, and in many countries absolutely declines. Moreover, it is commonly assumed that an intrinsic relationship exists between potential output growth and the equilibrium real interest rate.
