Abstract
This research addresses empirically mainly, the issue of the long run impact of the real Gdp growth rate on the real rate of interest. The model is based on growth theories, rather than in the savings-investment market, and implies a positive and close to one impact of real growth on the real interest rate. The results obtained for a sample starting from the end of World War II, for the UK and the US, broadly support the theoretical result. A negative impact of the real rate on Gdp growth, however, is not detected. An aggregate model is also estimated, yielding similar conclusions. A non linear development of the mixed-model estimation technique originally suggested by Durbin and Theil, is implemented to obtain several of the main results.
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