The key issue of the long-term equilibrium

In traditional, long-term macroeconomics: The real interest rate is determined by the equilibrium between savings and investment; Inflation is determined by the money supply growth rate. But observed facts are not consistent with these theoretical characteristics of the long-term equilibrium: Monetary policy still seems to have a major impact on the real long-term interest rate; There is no significant link between money supply growth and inflation. The “neo-Fisherian” logic could explain why monetary policy determines the real long-term interest rate and why inflation is low, but not why there is both low inflation and strong money supply growth. The most likely explanation for the long-term equilibrium as observed is that there is no long-term equilibrium, and that the economy moves from one short-term equilibrium to the next. In the short term, rapid money supply growth leads to low interest rates, and the weakening of Phillips curve effects (the link between unemployment and inflation) explains the low inflation.