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Intuitively I would guess that real interest rates are highly related to investment.

But there is a very low interest rate volatility, compared to investment:

log investment is about 20 times more volatile than real interest rates. The standard deviation of interest rates is about 0.15 of that of log gdp, while investment is about 3 times as much.

What explains this massive difference?

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    $\begingroup$ This question is missing a lot of key information, as it is hard to see where your numbers come from. The most basic is: what country are you basing this on? Then, we would need to know what interest rate/inflation rate you are using, along with the investment series. Finally, what definition of volatility are you using? You are comparing the logarithm of the (dollar) amount of investment versus the real interest rate; these are quite different units. $\endgroup$ – Brian Romanchuk May 8 '18 at 11:24
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In most countries, interest rates are actively managed by the government or central bank in pursuit of various policy objectives (some closely linked to investment, some, like stable foreign exchange markets, not). Investment in turn is determined by a wide range of factors other than interest rates. Basically I don't think that your assumption of a close link is valid.

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  • $\begingroup$ Nominal interest rates are set by the cb, but the equilibrium real interest rate is not. In theory, inflation should adjust in the medium term to get the real interest rate to the equilibrium real interest rate, given the CB nominal rate. So this doesn't really directly answer the question. $\endgroup$ – user56834 May 8 '18 at 12:55

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