Interest rate as main determinants of the economy

Abstract

In the context of globalization and post-industrial society the financial sector of economy manages the real sector. And that is why in order to deal with the processes of production and distribution of wealth in society we need to pay much attention to credit and financial system. Banks performs major role in this system, they are a universal institution for provision and flow money into the economy. Without their function any economy cannot exist. The subject of my research is the bank interest. One of the main questions of any economy is what interest rates should be used in lending. Using the teaching of Keynes, Marks, Friedman, Fisher I did a study of economic nature of bank interest. The paper studies how the economic growth depends on level of interest rates, role of bank interest in the formation of inflation, reconsidered Fisher’s equation about nominal interest rate. All surveys were conducted on the basis of present economic statistics. On the basis of my research report was made about the level of interest rates on lending that is necessary for economic modernization. The paper presents the methodology for reducing lending interest rates.