Consumption and housing wealth breakdown of the effect of a rise in interest rates

Navarro, Manuel León; Frutos, Rafael Flores de

doi:10.1080/00036846.2011.558484

Cited by 6 publications

(2 citation statements)

References 17 publications

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“…In a particular empirical study for Japan [16] it was found that the effectiveness of monetary policy is lower when interest rates are close to zero. A rise of the interest rate can have an indirect effect on the deterioration of the property market [17], including the growth of housing wealth and the growth rate of housing prices.…”

Section: Discussion and Concluding Remarksmentioning

confidence: 99%

An age-structured model for the effect of interest rate changes on consumption

Kozlov¹

2021

SSRN Journal

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A model for the effect of an interest rate change on household consumption is developed. The approach is age-structured: households reconsider their consumption patterns at the moment of the interest rate change and the changes of the consumption patterns are age dependent. These changes for different age groups contribute to the modification of aggregate consumption. Numerical simulation shows that a decrease of the interest rate leads to a consumption boost (a substantial increase of consumption in the short run), which diminishes as time passes and consumption gets fully adjusted to the new interest rate value. The consumption boost is achieved by an increase of the debt load.

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Section: Discussion and Concluding Remarksmentioning

confidence: 99%

An age-structured model for the effect of interest rate changes on consumption

Kozlov¹

2021

SSRN Journal

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“…After that, take a look at consumption, an increase in interest rate directly leads to a 0.13% fall in expenditure. Then, the decreasing trend continues until it reaches 1.33% [4]. By contrast, a decrease in interest means that consumers will be likely to borrow more.…”

Section: Interest Rate and Consumption Decisionsmentioning

confidence: 95%

The Global Effect of Fed Rate Hikes: Stocks, Bonds, and Foreign Exchange Markets

2023

AEMPS

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On 23rd March 2023, the Federal Reserve has once again increased its federal funds rate. The policy is published aim for reduce the high inflation rate in the US and prevent once again getting into a recession just like in 2008. This brings both advantages and disadvantages to both the domestic and foreign economies. In this paper, some basic impacts are explained including effects on consumption and investment decisions, stocks and bonds markets, and international relations. As the rise in interest rate increases cost of borrowing and discourages speculation, generally, economic activities are reduced. At the same time, this gives foreign countries heavy pressure by creating outflows of investment funds. Looking forward to the future, it is still possible for the Fed to keep raising its interest rate. To prevent further damages, foreign countries may use expansionary fiscal policy as it can stimulate consumption and investment, and most importantly, bring possibilities of improved economy potential.

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Residential versus financial wealth effects on consumption from a shock in interest rates

Navarro¹,

Frutos²

2015

Economic Modelling

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Consumption and housing wealth breakdown of the effect of a rise in interest rates

Cited by 6 publications

References 17 publications

An age-structured model for the effect of interest rate changes on consumption

An age-structured model for the effect of interest rate changes on consumption

The Global Effect of Fed Rate Hikes: Stocks, Bonds, and Foreign Exchange Markets

Residential versus financial wealth effects on consumption from a shock in interest rates

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