This paper documents the role of consumption in explaining the weak interest rate effect of monetary transmission in Japan. Economic theory suggests circumstances in which a rise in short term real interest rates can increase consumption, contrary to much conventional wisdom. This paper suggests...

The consumption behaviour of UK, US and Japanese households is examined and compared using a modern Ando-Modigliani style consumption function. The models incorporate income growth expectations, income uncertainty, housing collateral and other credit effects. These models therefore capture...