Using the Almone model to measure the time regression of the interest rate in some macroeconomic variables: The United States of America as a model

Abstract

Interest rate is one of the most important monetary policy instruments that is used both in times of crisis and in recovery cycles to influence macroeconomic variables, as well as the fact that the interest rate is one of the instruments that the real economy over a certain period, depending on the degree of economic dynamism.This research aimed to use time-distributed variables to measure and analyze the dynamic effects of interest rate changes and their reflection on certain macroeconomic variables in the United States during the period (2000.Q1 - 2020.Q4) using the Almone model. The study concluded that the interest rate is one of the most important tools used by monetary authorities to influence the components of aggregate demand (investment and consumption), as well as being the most readily transferable tool to the real economy. Furthermore, based on the estimation results, it became clear that investment increased at a decreasing rate with rising interest rates during the initial period of the first slowdown, i.e., after three months, due to the increased cost of using capital. To avoid surprises that may occur in a large-scale economy like the US economy, policy must be formulated systematically and in a way that is understandable to businesses and households to help them make economic decisions and plan for the future.