Volatile Interest Rates, Volatile Crime Rates: A new argument for interest-rate smoothing
AbstractGood 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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Bibliographic InfoPaper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 2004-694.
Length: 19 pages
Date of creation: 01 May 2004
Date of revision:
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More information through EDIRC
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:
- NEP-ALL-2005-03-20 (All new papers)
- NEP-CFN-2005-03-20 (Corporate Finance)
- NEP-MAC-2005-03-20 (Macroeconomics)
- NEP-MON-2005-03-20 (Monetary Economics)
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