
Impact of Interest Rate Changes on the Automobile Market - bpolania
http://libertystreeteconomics.newyorkfed.org/2015/11/end-of-the-road-impact-of-interest-rate-changes-on-the-automobile-market.html#.VlMwU66rQ6g
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_yosefk
100 basis point is 1% (why they don't just call it 1% I don't know, that'd be
more readable for 9900 BP of readers...)

Now, 100 BP is what, 10x larger than the long-awaited "first rate hike in a
decade"? Why do they even discuss such a "drastic" rate change? It'd take
years for the interest rate to climb that much at the speed they say they
intend to raise it and then it would no longer be a "shock increase" of the
sort they discuss.

~~~
var_eps
Why is the rate change important? For two main reasons: 1) it signals the
intention of the FED to actively use its tools to manage the growth of the
economy as opposed to uncritically encouraging it; 2) even a token charge
decreases the demand for what was once free and breaks a crucial psychological
barrier for further increases in the future (see point 1; also, the freemium
model in apps for an analogy).

So any change upwards really matter after nearly a decade of decreases and the
zero-bound rates.

Basis points communicate the absolute change rather than the relative change
to remove ambiguity. For example, consider a 1% interest rate: if it goes up
by 100 BPS, the new rate is 2%; if by 1%, the new rate is 1.01%.

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dnautics
the graphs in this are shockingly laughable and belie the complete insanity of
macroeconomic dogma. To compare, I once simulated electron transfers between
iron-sulfur clusters in an enzyme and, not knowing the exact kinetic
parameters, used a monte carlo method to estimate variational effects.
([https://docs.google.com/document/d/1yeiOE1Gy0YoPXlLdMo9y8XSS...](https://docs.google.com/document/d/1yeiOE1Gy0YoPXlLdMo9y8XSSABvps-2I7f0Lqhz26x4/edit?usp=sharing&authkey=CITmk9gH))

The graphs, accordingly, show confidence intervals and are most certainly not
smooth or simple.

