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Changes in consumers’ awareness of interest rates (deposits and loans) are important for making financial decisions, particularly in the banking industry. However, little is known about the effect of consumer awareness on customer orientation and loyalty. The purpose of this paper is to examine how changes in consumers’ awareness of interest rates in Korea can influence customer loyalty, considering banks’ efforts to improve customer orientation. The authors explicitly rationalize the fact that consumers’ awareness of interest rates can play an important role in moderating the strength of the relationship between customer orientation and loyalty.

The data were collected from participants (n=327) who had made banking transactions based on their real income in Seoul. Participants mainly focused on personal loans and debts, and most people had banked with a specific bank (one of the main Korean banks) for longer than three years. The authors tested the effect of interest rates using two methodologies, namely, a field study using SEM and an experimental design.

The study tested these relationships with survey data and two simulated experiments. The findings indicated that the influence of customer orientation on customer loyalty decreased with the increase in loan interest rate awareness. Moreover, the customer orientation-loyalty link weakened with the increase in awareness of central bank base rates. Conversely, the awareness that loan rates were decreasing strengthened the relationship.

Banks need to know the importance of periodic consultation services with valuable consumers who transact with one or more banks because changes in the consumer awareness of interest rates influence customer loyalty (or switching behavior), particularly when their awareness of loan interest rates increases.

This paper is, to the best of the authors’ knowledge, the first to investigate the consequence of such a change in consumers’ awareness of both deposit and loan interest rates with regard to the relationship between customer orientation and loyalty.

This study aims to investigate whether changes in consumer interest rate, exchange rate and housing supply have permanent effects on housing inflation in Turkey.

For this purpose, data from 2010M01 to 2020M06 and changes in consumer interest rate, exchange rate, housing supply and housing inflation were used. Relationships between variables are analyzed first by the Granger causality tests and then the conditional frequency domain causality tests. The conditional frequency domain causality test specifically reveals the permanent causality between variables, whether there is a permanent effect.

According to the Granger causality test results, there are causality relationships from changes in the consumer interest rate and exchange rate to housing inflation. However, there is no causality relationship between housing supply and housing inflation. According to the conditional frequency domain causality test results, there is causality for the permanent and mid-term from changes in the consumer interest rate to housing inflation and causality for the mid-term and temporary from changes in the exchange rate to housing inflation. Additionally, it was found that there are causality relationships between changes in the consumer interest rate and changes in the exchange rate.

The first limit of the study is that only 2010M01-2020M06 months can be considered. Because the date that variables started common is 2010M01. Besides, there is a limit in the study in variables used. Many variables, both micro and macro, can be added to affect housing inflation.

Housing inflation is a remarkable issue in Turkey. There is an increase in the number of studies on the subject in recent years. For this reason, the study is trying to contribute by approaching the subject from a different angle. The most important contribution of the study is that it has not been investigated whether the determinants of housing inflation have permanent or temporary effects, which were not done in previous studies. In addition, the method used reveals how many months the effects of changes in exchange rates, consumer interest rates and housing supply on housing inflation last. Based on the findings obtained from the methods, important economic and political implications have been put forward in depth.

This paper aims to contribute to the analysis concerning how inflation forecasts from different economic agents (professional forecasters and consumers) lead to varying levels of central bank credibility and how it affects the monetary policy interest rate and its expectations.

Based on the Brazilian economy data from June 2007 to May 2022, the authors provide evidence that is useful for search mechanisms that improve the conduct of monetary policy through the management of inflation expectations. The authors perform several ordinary least squares and generalized method of moments regressions inspired by the Taylor rule principle. In brief, the benchmark model considers that the monetary policy interest rate and its expectations respond to departures of inflation expectations to the target (a proxy for central bank credibility) and the level of economic activity.

The main result of the analysis is that inflation expectations from professional forecasters and consumers imply different perceptions of central bank credibility that affect the monetary policy interest rate and expectations for horizons until one year ahead.

The novelty that the authors bring from the analysis is that the authors calculate central bank credibility by taking into account the “public beliefs” of different economic agents. Furthermore, the authors analyze the effect of central bank credibility from professional forecasters and consumers on the monetary policy interest rate and its expectations.

We design experimental economies based on a New Keynesian Dynamic Stochastic General Equilibrium (DSGE) model. We apply shocks to tastes, productivity, and interest rate policy, and measure the persistence of these shocks. We find that, in a setting where goods are perfect substitutes, there is little persistence of output shocks compared to treatments with monopolistic competition, which perform similarly irrespective of whether or not menu costs are present. Discretionary central banking is associated with greater persistence than automated instrumental rules.

This paper focuses on the role of sentiment and monetary policy (both domestic and the United States (US)) in explaining the changes in the Mexican tourism firms' stock returns for the period 1998M03–2019M12.

The authors conducted the ordinary least square regression estimations using various models to investigate the impact of sentiment and monetary policy changes on tourism firms' stock returns. Furthermore, to provide a robust check, the authors run all regression models based on the capital asset pricing model by regressing the excess returns of tourism firms' stocks on all independent variables.

Empirical findings reveal that the changes in Mexican consumer sentiment have a stronger positive effect on tourism firms' stock returns than Mexican business sentiment changes. However, the US consumer and business sentiment are irrelevant to tourism firms' stock returns. Moreover, this study’s results indicate that changes in the US interest rates positively influence tourism firms' stock returns. This study’s findings show that as the monetary divergence between Mexico and the US (differential real interest rates) widens, the lower is the tourism firms' stock returns.

This study is the first to extend the prior studies by examining the effects of sentiment and monetary policy (both domestic and US role) on Mexican tourism stock return.

This chapter analyzes the exchange rate pass-through (ERPT) into different prices for 12 euro area (EA) countries. We provide new up-to-date estimates of ERPT by paying attention to either the time-series properties of data and variables endogeneity. Using VECM framework, we examine the pass-through at different stages along the distribution chain, that is, import prices, producer prices, and consumer prices. When carrying out impulse response functions analysis, we find a higher pass-through to import prices with a complete pass-through (after one year) detected for roughly half of EA countries. These estimates are relatively large compared to single-equation literature. We denote that the magnitude of the pass-through of exchange rate shocks declines along the distribution chain of pricing, with the modest effect recorded for consumer prices. When assessing for the determinant of cross-country differences in the ERPT, we find that inflation level, inflation volatility, and exchange rate persistence are the main macroeconomic factors influencing the pass-through almost along the pricing chain. Thereafter, we have tested for the decline of the response of consumer prices across EA countries. According to multivariate time-series Chow test, the stability of ERPT coefficients was rejected, and the impulse responses of consumer prices over 1990–2010 provide an evidence of general decline in rates of pass-through in most of the EA countries. Finally, using the historical decompositions, our results reveal that external factors, that is, exchange rate and import prices shocks, have had important inflationary impacts on inflation since 1999 compared to the pre-EMU period.

The purpose of this paper is to investigate four possible asymmetries in US aggregate consumption and its major components (durables, non-durables, and services) for the period 1990-2013. Understanding the asymmetric behavior of the components is important since the impact of monetary policy on separate consumer spending categories may differ substantially.

The authors first employ stationarity and cointegration tests to specify and estimate the long-run equilibrium relationship between consumer spending and such variables as disposable income, consumer sentiment, and the expected real interest rate. The authors then specify a structural error-correction model for each spending category to simultaneously investigate such possible asymmetries due to the ratchet effect, psychological negativity bias, interest rate effect, and varying degree of adjustment in eliminating disequilibrium defined as the gap between actual and desired spending.

First, consumption and its major components all display asymmetric behavior consistent with psychological negativity bias. Second, consumer spending on durable goods also displays asymmetries consistent with both the ratchet effect and the interest rate effect. Third, non-durables respond asymmetrically to disequilibrium; consumers adjust (increase) spending on non-durables only when actual spending is below desired spending on non-durable goods. Fourth, services also respond asymmetrically to disequilibrium; consumers adjust (reduce) spending on services only when actual spending is above desired spending on services.

This study provides new insight on the asymmetric behavior of consumer spending. The authors believe that the findings should help with macroeconomic policymaking when such indicators as income, consumer sentiment, and expected real interest rates display significant variations.

The purpose of this paper is to explore the role of monetary policy transmission mechanism channel on firms' investment spending. The focal point is to investigate the differential of monetary policy effects across sub‐sector firms' investment by examining the role of interest rates, and broad credit channel of monetary transmission.

The following research design has been employed in examining the relevance of both monetary policy channels. First, the firm user cost of capital as a proxy for the interest rates channel is constructed. Second, the neoclassical model of firm‐level investment function has been estimated using the dynamic panel data technique.

The results revealed that the monetary policy transmission mechanism works through both interest rate, and broad credit channels in influencing firms' investment spending in the Malaysian economy. Monetary policy has heterogeneous effects in respect of sub‐sectors of the economy. In the long‐run, the firm investment in the consumer products and services sectors are significantly affected by the interest rate and broad credit channels. However, the firm investment in the industrial products and property sectors has only been significantly affected by interest rates and broad credit channel, respectively.

The empirical results provide new evidence on the microeconomic effects of monetary policy in a small open economy (i.e. Malaysia) in two dimensions. First, this finding has supported the relevance of interest rates and broad credit channel of monetary transmission in a small open economy. Second, monetary policy effects are also heterogeneous by sub‐sectors of the economy, as some sectors (for example, consumer products, industrial products, and services) are significantly affected by monetary policy, and other sub‐sectors (for example, property) are not affected.

The purpose of this study is to examine how the Islamic banks fix their mark-up for Murabaha contract strategically when traditional banks also co-exist in a country. This study also aims to investigate what role the varying degree of Iman (faith) plays in shaping the preferences of the consumers to choose between the services of Islamic banks and the traditional banks.

This paper constructs a mathematical model like the Bertrand competition in neo-classical economic theory. A religiosity parameter for the consumers has been inserted into their demand functions for their products. A simple optimization technique from mathematics has been used to arrive at the results.

This paper applies game theory to analyze how Islamic banks determine their mark-up when they are facing competition with traditional banks. It considers the demand functions of the consumers for the products of Islamic banks and traditional banks. The demand functions depend on the mark-up, as well as on the interest rate with the difference that they also depend on the religiosity of the consumers. The paper shows that Islamic, as well as the conventional banks charge lower prices for their loans if there is consideration of religiosity aspect of the consumers. Further, it shows that as religiosity increases in a country, the lending rates decrease. The theoretical result is also consistent with the real practices of the banks. Therefore, the dual banking system is welfare enhancing for the customers.

The Islamic banks can leverage the religiosity aspect of the consumers and expand their business competitively by charging them lower mark-up. The adherence of religious customers to the services of Islamic banks creates some kind of loyalty premium for them. This could lead to the reduction of mark-up price triggering competition between both types of banks to attract more customers. Therefore, it is prudent for the government to develop a system for furthering the quality of honesty that is an integral part of Islam.

To the best of author’s knowledge, this is the first paper where it has been analyzed theoretically how the Islamic banks determine their mark-up for Murabaha contract strategically. This approach explains why the rate of return of Islamic banks hinges on the interest rates of traditional banks. One of the novel feature of this paper is that religiosity character of the consumer is good for banks because religiosity prohibits the people to default on their loans.

The purpose of this paper is to focus on the relationship between attitudinal data from the long-running Michigan Surveys of Consumers and US real GDP growth. One survey question asks, “Generally speaking, do you think now is a good time or a bad time to buy a house?” with the follow-up question “Why do you say so?” There are several factors for consumers to choose as reasons. Given the strong link between US housing market activity and business cycles, the authors ask whether the responses to the follow-up question explain the behavior of output growth.

The authors employ an augmented autoregressive model to investigate the relationship between output growth and the responses to the follow-up question for 1986–2007 and for 1986–2018, which includes the 2008 financial crisis. The authors follow the general-to-specific approach to obtain the final model estimates for interpretation. For a deeper analysis, the authors estimate the model using the responses of survey participants in the bottom 33 percent, middle 33 percent and upper 33 percent income categories, separately. While avoiding aggregation bias, this approach helps reveal important information embodied in the cross-sectional distribution of the data.

The follow-up question focuses on such factors as home prices, mortgage rates, houses as a good/bad investment, timing, uncertain future and affordability. The authors find that the majority of these factors chosen as reasons by consumers in the middle and upper 33 percent income categories explain the behavior of output growth. Among the factors chosen as reasons by consumers in the bottom 33 percent income category, only the mortgage rate and uncertain future explain output growth.

This study provides new insights into the usefulness of detailed consumer survey data in explaining the behavior of output growth and further underlines the usefulness of such measures across different income categories for revealing important information contained in the cross-sectional distribution of the data.