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Volatile Interest Rates, Volatile Crime Rates: A new argument for interest-rate smoothing

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Author Info
Garett Jones ()
Ali Kutan ()

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Abstract

Good monetary policy requires estimates of all of its effects: monetary policy impacts traditional economic variables such as output, unemployment rates, and inflation. But does monetary policy influence crime rates? By extending the vector autoregression literature, we derive estimates of the dynamic effect of higher interest rates on crime rates. Higher interest rates have socially and statistically significant positive effects on rates of theft and knife robberies, while effects on rates of burglary and assault are smaller and statistically insignificant. Higher interest rates have no effect on homicide rates. We conclude that monetary policy influences the rate of economically-motivated crimes.

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Publisher Info
Paper provided by William Davidson Institute at the University of Michigan Stephen M. Ross Business School in its series William Davidson Institute Working Papers Series with number 2004-694.

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Length: 19 pages
Date of creation: 01 May 2004
Date of revision:
Handle: RePEc:wdi:papers:2004-694

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Related research
Keywords: crime; monetary policy; vector autoregressive models (VARs);

Find related papers by JEL classification:
E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Ehrlich, Isaac, 1996. "Crime, Punishment, and the Market for Offenses," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 43-67, Winter. [Downloadable!] (restricted)
  2. Levitt, Steven D, 1997. "Using Electoral Cycles in Police Hiring to Estimate the Effect of Police on Crime," American Economic Review, American Economic Association, vol. 87(3), pages 270-90, June. [Downloadable!] (restricted)
    Other versions:
  3. Freeman, Richard B, 1996. "Why Do So Many Young American Men Commit Crimes and What Might We Do about It?," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 25-42, Winter. [Downloadable!] (restricted)
    Other versions:
  4. Ehrlich, Isaac, 1973. "Participation in Illegitimate Activities: A Theoretical and Empirical Investigation," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 521-65, May-June. [Downloadable!] (restricted)
  5. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1998. "Monetary Policy Shocks: What Have We Learned and to What End?," NBER Working Papers 6400, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  6. Freeman, Richard B., 1999. "The economics of crime," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 52, pages 3529-3571 Elsevier. [Downloadable!] (restricted)
  7. Grogger, Jeff, 1998. "Market Wages and Youth Crime," Journal of Labor Economics, University of Chicago Press, vol. 16(4), pages 756-91, October. [Downloadable!] (restricted)
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  8. Gary S. Becker, 1968. "Crime and Punishment: An Economic Approach," Journal of Political Economy, University of Chicago Press, vol. 76, pages 169. [Downloadable!] (restricted)
    Other versions:
  9. Brunner, Allan D, 2000. "On the Derivation of Monetary Policy Shocks: Should We Throw the VAR Out with the Bath Water?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(2), pages 254-79, May.
  10. Imrohoroglu, A. & Merlo, A. & Rupert, P., 2000. "What Accounts for the Decline in Crime?," Working Papers 00-11, C.V. Starr Center for Applied Economics, New York University. [Downloadable!]
    Other versions:
  11. Ehrlich, Isaac, 1981. "On the Usefulness of Controlling Individuals: An Economic Analysis of Rehabilitation, Incapacitation, and Deterrence," American Economic Review, American Economic Association, vol. 71(3), pages 307-22, June. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Habibullah, M.S. & Law, Siong-Hook, 2008. "Property crime and macroeconomic variables in Malaysia: Some empirical evidence from a vector error-correction model," MPRA Paper 12112, University Library of Munich, Germany. [Downloadable!]
  2. Yearwood, Douglas L. & Koinis, Gerry, 2009. "Revisting Property Crime and Economic Conditions: An Exploratory Study to Identify Predictive Indicators beyond Unemployment Rates," MPRA Paper 16834, University Library of Munich, Germany. [Downloadable!]
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