INTEREST RATE PROMINENCE IN CONSUMER DECISION‐MAKING

Carola Binder

Economic Inquiry, 2018, vol. 56, issue 2, 875-894

Abstract: Variations in consumers' responsiveness to interest rates across households and over time have important implications for monetary transmission. Responses from the Michigan Survey of Consumers provide an indication of the degree to which interest rates are a prominent consideration in spending decisions, news recollection, and financial situations. Prominence is strongest in housing attitudes, increases with income, education, and homeownership, and declined in the Great Recession. Rate prominence is associated with stronger responsiveness of consumption attitudes to monetary policy. (JEL D84, D91, E21, E40, E50)

Date: 2018
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