Do Consumer Borrowing, Inflation, and Prime Interest Rate Increase When M1 Is Increased?

John Heim

Chapter Chapter 21 in Why Fiscal Stimulus Programs Fail, Volume 1, 2021, pp 449-466 from Springer

Abstract: Abstract This chapter tests the effects of M1 on consumer borrowing, inflation, and interest rates. The effects on consumer borrowing of growth in M1 and endogenous M1 seem to be nil. Overall, the evidence strongly suggests increases in the M1 money supply affect inflation, but that it is the economy-driven endogenous portion of growth that affects inflation, not the FR purchases portion. M1 was found to have an effect on interest rates in Keynesian LM curve models, but not in Taylor Rule models of interest rate models, probably because in Taylor Rule models, the effects of M1 are already present though there effect on inflation.

Keywords: M1; Money supply; Consumer borrowing; Inflation; Interest rates (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-030-65675-1_21

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DOI: 10.1007/978-3-030-65675-1_21

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