Hein and Schoder (2011) therefore a

Hein and Schoder (2011) therefore applied a more refined approach,adjusting the theoretical model in several respects in order to make it‘more realistic’ and thus applicable to the available data. For this purpose,not only debt finance but also external equity finance together with there spective rates of return, hence the monetary interest rate corrected for the rate of inflation and the dividend rate, are included in the investment and saving functions of the model. The rate of capacity utilization only enters as a deviation from its long- run average into the investment function, and the saving function allows for a positive propensity to save from wages, too. Finally, the distribution function contains not only the rate of interest as in our model above, but also the stock of debt. These modified equations were then estimated for Germany and the US for the period from 1960 to 2007, and the effects of a change in the real rate of interest on the equilibrium were calculated for the whole period and for sub-periods, in particular for the periods from 1960 to 1982 and from 1983to 2007. For these estimations, Hein and Schoder (2011) considered there spective debt–capital ratios to be exogenous, so that in the terminology of our theoretical model in Section 9.2 they are concerned with short- run equilibria and with effects of changes in the real rate of interest on these equilibria.