Cyclically too, much of the perceived link between growth and interest rates, we suspect, comes from observing a decline in both growth and interest rates during economic slowdowns and connecting the two. The decline in real interest rates cyclically also has more to do with the behaviour of ex ante investment relative to ex ante savings and, in particular, to the greater amplitude of the swings in investment relative to those of savings. As desired investment falls sharply (while desired savings tend to remain more steady) towards the trough of the cycle, so do interest rates. Similarly, an
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