The annual flow of investment is quite volatile, although the
accumulated capital stock grows more steadily; the real interest rate is
quite volatile and has no clear trend. Canada’s non-residential capital
stock has increased by more than three times since 1965, an average
annual growth rate of 2.6 percent. The real interest rate (here measured
as the nominal interest rate on three-month Treasury bills minus the
annual rate of inflation) is much more volatile.
(031-0002.)Source: Author’s calculations based on data from Statistics Canada’s CANSIM data set: Table
Over long periods of time, technological change and population growth
can explain both a rising capital stock and an interest rate with no clear
long-run trend. We have already stated that population growth leads to
an increase in both the demand for and the supply of financial capital. A