Research Project: How changes in interest rates influence consumer behaviour

Research Project: How changes in interest rates influence consumer behaviour

Objective:

Analyse how variations in interest rates influence consumer behaviour, spending and saving; thus provide broader insight into monetary policy decisions and its effects.

Background:

Blundell (1988) states that there are very few aspects of economic policy that do not require some knowledge of household or individual consumer behaviour. (Blundell R., 1988) Similarly, this research aims to examine whether consumer behaviour itself is influenced by interest rates, which is an economic instrument part of the monetary policy, and if that is the case, how changes in interest rates reflect on consumer spending and saving behaviour. Understanding such correlation can provide crucial insight for policymakers and financial institutions.

Methodology:

Data used for the analysis consists of interest rates and the corresponding consumer prices indices.

Limitations

Changes in consumer behaviour cannot be explained solely on changes in interest rates. The complex nature of consumer behaviour cannot be ignored, nor other economic and financial factors.

The paper also focuses on the Western landscape for the sake of easy access to data. This poses another limitation as the paper lacks global conclusions.