The obsolete system of capacity licensing of industries was discontinued; the existing legislative restrictions on the expansion of large companies were removed; phased manufacturing programmes were terminated; and the reservation of many basic industries for investment only by the public sector was removed.
These effects are what we would expect from our textbook models; they are also at work in the FRB/US model being used here. The empirical evidence on the link between trend growth and long-run equilibrium interest rates is mixed. Laubach and Williams (2003) find evidence of a link that is consistent with the predictions of models such as FRB/US.