Published Online:January 2025
Product Name:The IUP Journal of Applied Finance
Product Type:Article
Product Code:IJAF020125
DOI:10.71329/IUPJAF/2025.31.1.22-109
Author Name:Katie Ann Dinsdale and Aleksandar Vasilev
Availability:YES
Subject/Domain:Finance
Download Format:PDF
Pages:22-109
This study assesses the impact of interest rates on consumption, focusing on how changes in the housing and financial markets implicate consumer spending habits. It addresses how interest rates alter foreign consumption, therefore how imports implicate the consumption of domestic products. While the initial results were not statistically significant, further analysis showed how interest rates have only a limited and weak effect on controlling consumption. However, housing and financial variables did influence consumption, particularly durable goods. The study concludes that monetary policy is ineffective and suggests that the US government explore alternative policies. Further research is warranted to assess the long-term effects on other variables on consumption.
Research on consumption is an extensively investigated area, traditionally, examining the impacts of changes in income. Nevertheless, in recent years, there has been a renewed interest in the effectiveness of monetary policy, and whether interest rates play a useful role in controlling consumption.