Monetary Policy Across the Urban Rural Divide

Author (Your Name)

Grace HillisFollow

Date of Award

2024

Document Type

Honors Thesis (Open Access)

Department

Colby College. Economics Dept.

Advisor(s)

Andreas Waldkirch

Abstract

This paper measures the effect of monetary policy on the consumption of Urban versus Rural Households. I utilize the Consumer Expenditures Survey, conducted by the Bureau of Labor Statistics, and St. Louis Federal Reserve Economic Data for information on important macroeconomic variables. My empirical strategy examines how total consumption, housing consumption, health, food, and transportation consumption are impacted by the federal funds rate for urban relative to rural households. My research provides evidence that when the Federal Reserve increases rates, the consumption of rural households falls more relative to urban households. This result is statistically significant when examining consumption related to housing, which may be motivated by differences in homeownership rates across these groups. Additionally, I find that being an urban household is associated with higher consumption relative to rural households; this is significant for total, housing, health, and food consumption These findings are consistent using alternative measures of monetary policy and inflation.

Keywords

Monetary Policy, Rural, Urban, Macroeconomics, Consumption

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