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I'd say it's a long sum of many small effects, hence probably poorly analyzed by economics.

Example: at least on effect depends on the number of outstanding fixed-rate loans vs floating-rate loans.

Simple reasoning: if you're a shop selling groceries and your monthly rent is indexed (because of borrowing or other reason) on floating rates, if rates go up you'll immediately raise prices.

On the other side, if your rent is indexed on fixed rates, you don't care directly about the interest rate rise until the next investiment decision.

by Laurent GUERBY on Wed Jan 17th, 2007 at 06:53:56 AM EST
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