IDEAS home Printed from https://ideas.repec.org/p/wdi/papers/2004-694.html
   My bibliography  Save this paper

Volatile Interest Rates, Volatile Crime Rates: A new argument for interest-rate smoothing

Author

Listed:
  • Garett Jones
  • Ali Kutan

Abstract

Good monetary policy requires estimates of all of its effects: monetary policy impacts traditional economic variables such as output, unemployment rates, and inflation. But does monetary policy influence crime rates? By extending the vector autoregression literature, we derive estimates of the dynamic effect of higher interest rates on crime rates. Higher interest rates have socially and statistically significant positive effects on rates of theft and knife robberies, while effects on rates of burglary and assault are smaller and statistically insignificant. Higher interest rates have no effect on homicide rates. We conclude that monetary policy influences the rate of economically-motivated crimes.

Suggested Citation

  • Garett Jones & Ali Kutan, 2004. "Volatile Interest Rates, Volatile Crime Rates: A new argument for interest-rate smoothing," William Davidson Institute Working Papers Series 2004-694, William Davidson Institute at the University of Michigan.
    • Handle: RePEc:wdi:papers:2004-694
    as

    Download full text from publisher

    File URL: http://deepblue.lib.umich.edu/bitstream/2027.42/40080/3/wp694.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Gary S. Becker, 1974. "Crime and Punishment: An Economic Approach," NBER Chapters, in: Essays in the Economics of Crime and Punishment, pages 1-54, National Bureau of Economic Research, Inc.
    2. Christiano, Lawrence J. & Eichenbaum, Martin & Evans, Charles L., 1999. "Monetary policy shocks: What have we learned and to what end?," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 2, pages 65-148, Elsevier.
    3. repec:eee:labchp:v:3:y:1999:i:pc:p:3529-3571 is not listed on IDEAS
    4. Richard B. Freeman, 1996. "Why Do So Many Young American Men Commit Crimes and What Might We Do about It?," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 25-42, Winter.
    5. Ehrlich, Isaac, 1981. "On the Usefulness of Controlling Individuals: An Economic Analysis of Rehabilitation, Incapacitation, and Deterrence," American Economic Review, American Economic Association, vol. 71(3), pages 307-322, June.
    6. Levitt, Steven D, 1997. "Using Electoral Cycles in Police Hiring to Estimate the Effect of Police on Crime," American Economic Review, American Economic Association, vol. 87(3), pages 270-290, June.
    7. Grogger, Jeff, 1998. "Market Wages and Youth Crime," Journal of Labor Economics, University of Chicago Press, vol. 16(4), pages 756-791, October.
    8. Isaac Ehrlich, 1996. "Crime, Punishment, and the Market for Offenses," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 43-67, Winter.
    9. Ehrlich, Isaac, 1973. "Participation in Illegitimate Activities: A Theoretical and Empirical Investigation," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 521-565, May-June.
    10. Freeman, Richard B., 1999. "The economics of crime," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 52, pages 3529-3571, Elsevier.
    11. Brunner, Allan D, 2000. "On the Derivation of Monetary Policy Shocks: Should We Throw the VAR Out with the Bath Water?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(2), pages 254-279, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yearwood, Douglas L. & Koinis, Gerry, 2009. "Revisting Property Crime and Economic Conditions: An Exploratory Study to Identify Predictive Indicators beyond Unemployment Rates," MPRA Paper 16834, University Library of Munich, Germany.
    2. Habibullah, M.S. & Law, Siong-Hook, 2008. "Property crime and macroeconomic variables in Malaysia: Some empirical evidence from a vector error-correction model," MPRA Paper 12112, University Library of Munich, Germany.
    3. Hazra, Devika, 2017. "Monetary policy and alternative means of payment," The Quarterly Review of Economics and Finance, Elsevier, vol. 65(C), pages 378-387.
    4. Sourav Batabyal, 2011. "Temporal Causality and the Dynamics of Crime and Delinquency," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 39(4), pages 421-441, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Denis Fougère & Francis Kramarz & Julien Pouget, 2009. "Youth Unemployment and Crime in France," Journal of the European Economic Association, MIT Press, vol. 7(5), pages 909-938, September.
    2. Paolo Buonanno, 2003. "The Socioeconomic Determinants of Crime. A Review of the Literature," Working Papers 63, University of Milano-Bicocca, Department of Economics, revised Nov 2003.
    3. Bruce Weinberg & Eric Gould & David Mustard, 1998. "Crime Rates and Local Labor Market Opportunities in the United States: 1979-1995," Working Papers 98-11, Ohio State University, Department of Economics.
    4. Entorf, Horst & Spengler, Hannes, 2000. "Socioeconomic and demographic factors of crime in Germany: Evidence from panel data of the German states," International Review of Law and Economics, Elsevier, vol. 20(1), pages 75-106, March.
    5. Ayse İmrohoroĝlu & Antonio Merlo & Peter Rupert, 2006. "Understanding the determinants of crime," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 30(2), pages 270-284, June.
    6. Pallab K. Ghosh & Gary A. Hoover & Zexuan Liu, 2020. "Do State Minimum Wages Affect the Incarceration Rate?," Southern Economic Journal, John Wiley & Sons, vol. 86(3), pages 845-872, January.
    7. Ochsen, Carsten, 2010. "Crime and labor market policy in Europe," International Review of Law and Economics, Elsevier, vol. 30(1), pages 52-61, March.
    8. Ann Dryden Witte & Robert Witt, 2001. "What We Spend and What We Get: Public and Private Provision of Crime Prevention," NBER Working Papers 8204, National Bureau of Economic Research, Inc.
    9. Milo Bianchi & Paolo Buonanno & Paolo Pinotti, 2012. "Do Immigrants Cause Crime?," Journal of the European Economic Association, European Economic Association, vol. 10(6), pages 1318-1347, December.
    10. Stephen Machin & Olivier Marie, 2006. "Crime and benefit sanctions," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 5(2), pages 149-165, August.
    11. Dongxu Wu & Zhongmin Wu, 2012. "Crime, inequality and unemployment in England and Wales," Applied Economics, Taylor & Francis Journals, vol. 44(29), pages 3765-3775, October.
    12. H. Naci Mocan & Stephen C. Billups & Jody Overland, 2005. "A Dynamic Model of Differential Human Capital and Criminal Activity," Economica, London School of Economics and Political Science, vol. 72(288), pages 655-681, November.
    13. Thomas A. Garrett & Lesli S. Ott, 2008. "City business cycles and crime," Working Papers 2008-026, Federal Reserve Bank of St. Louis.
    14. Marcel Fafchamps & Christine Moser, 2003. "Crime, Isolation and Law Enforcement," Journal of African Economies, Centre for the Study of African Economies, vol. 12(4), pages 625-671, December.
    15. Mirko Draca & Theodore Koutmeridis & Stephen Machin, 2019. "The Changing Returns to Crime: Do Criminals Respond to Prices?," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 86(3), pages 1228-1257.
    16. Akçomak, İ. Semih & ter Weel, Bas, 2012. "The impact of social capital on crime: Evidence from the Netherlands," Regional Science and Urban Economics, Elsevier, vol. 42(1-2), pages 323-340.
    17. Kausik Chaudhuri & Payel Chowdhury & Kevin Reilly, 2013. "A New Perspective on Violent Crime Burden Index: Evidence from Indian Districts," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 110(2), pages 771-789, January.
    18. Diogo G. C. Britto & Paolo Pinotti & Breno Sampaio, 2022. "The Effect of Job Loss and Unemployment Insurance on Crime in Brazil," Econometrica, Econometric Society, vol. 90(4), pages 1393-1423, July.
    19. Sergio Beraldo & Raul Caruso & Gilberto Turati, 2012. "Life is Now! Time Discounting and Crime: Aggregate Evidence from the Italian Regions (2002-2007)," Working papers 013, Department of Economics, Social Studies, Applied Mathematics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino.
    20. Mirko Draca & Stephen Machin, 2015. "Crime and Economic Incentives," Annual Review of Economics, Annual Reviews, vol. 7(1), pages 389-408, August.

    More about this item

    Keywords

    crime; monetary policy; vector autoregressive models (VARs);
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wdi:papers:2004-694. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: WDI (email available below). General contact details of provider: https://edirc.repec.org/data/wdumius.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.