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Interest Rates and the Market for New Light Vehicles
Author(s) -
COPELAND ADAM,
HALL GEORGE,
MACCINI LOUIS J.
Publication year - 2019
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/jmcb.12564
Subject(s) - interest rate , economics , production (economics) , point (geometry) , market rate , supply and demand , monetary economics , agricultural economics , market price , microeconomics , geometry , mathematics
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.