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Interest Rates and the Market for New Light Vehicles

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  • ADAM COPELAND
  • GEORGE HALL
  • LOUIS J. MACCINI

Abstract

We study the impact of interest rate changes on the demand and supply of new light vehicles in an environment where consumers and manufacturers face their own interest rates. Interest rate changes impact the auto market through both households and manufacturers. For the impact of rate changes on price and output growth, the household channel is quantitatively more important. A 100 basis‐point increase in both interest rates causes annual growth rates of production to fall from 1.0% to −11.0% and sales to fall from 1.0% to −2.9% in the short run.

Suggested Citation

  • Adam Copeland & George Hall & Louis J. Maccini, 2019. "Interest Rates and the Market for New Light Vehicles," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 51(5), pages 1137-1168, August.
  • Handle: RePEc:wly:jmoncb:v:51:y:2019:i:5:p:1137-1168
    DOI: 10.1111/jmcb.12564
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    References listed on IDEAS

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    1. 2012 deflation explained
      by Bruno Duarte in EUnomics on 2018-09-19 21:04:50

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    More about this item

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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