8 Basic Example Calculations for the FRG
For a first demonstration of the effectiveness of the so-accounted system, we make some further simplifications permitted. We assume that the foreign balance is relatively equal, and therefore use . Furthermore, the relatively low population growth in the FRG can be set to. The savings rate in the BRD leveled most of the time by a value of about 10% annually, so we can start with a flat constant . The values for and can be determined from the real data series. is the average long-term nominal interest rate on all assets. Thus we can write now:
(8.1)
and we we get the simplified19 equation system as
(8.2 a)
(8.2 b)
which now only contains the core effects and is therefore suited best to a first examination of the most important relationships. With the constant values and and we get the already very good agreement between theory and reality in its simplest form (Figure 5 and Figure 6):