Monetary Policy Transmission, House Prices and Consumption

Mthuli Ncube () and Eliphas Ndou

Chapter 4 in Monetary Policy and the Economy in South Africa, 2013, pp 43-64 from Palgrave Macmillan

Abstract: Abstract This chapter examines the percentage decrease in consumption expenditure, attributed to the changes in household wealth, due to a contractionary monetary policy shock in South Africa. Interest rate changes can affect consumption through indirect and direct channels (HM Treasury 2003). The indirect effects operate in two stages. First, changes in the interest rates will affect housing demand and supply, which will consequently lead to changes in house prices and household wealth. Second, a decrease in household wealth directly reduces current consumption. The direct link occurs when changes in the interest rates affect consumption directly; these changes have an income or cash-flow effect.

Keywords: Interest Rate; Monetary Policy; House Price; Household Wealth; Housing Sector (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-137-33415-2_4

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DOI: 10.1057/9781137334152_4

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