EFFECTS OF INTEREST RATE TO INVESTMENT AND CONSUMPTION OF THAILAND

Abstract

The purposes of the research were to 1) To study the long-term relationship between interest rates, inflation, oil prices and economic growth. 2) To analyze the impact of interest rates on investment. 3) To analyze the impact of interest rates on consumption. And 4) To use the two-stage least squares regression analysis tool to handle endogeneity problems. Conduct research using the Econometric Analysis method to study the relationship and impact of interest rates on investment and consumption. Using Cointegration analysis with Simultaneous equations model (SEM) and Two-stage least squares regression model (2SLS) analysis. Data used in the analysis include interest rates, inflation rates, oil prices, investment, consumption, and GDP growth from 1999 to 2022.

The result of the study were as follows: 1) In the long run, interest rates are related to inflation, oil prices and GDP growth. That is, interest rates vary in line with inflation and GDP growth, but inversely with oil prices. 2) The impact of interest rates on investment found that the increase in interest rates in the past year had a negative relationship with investment, but the inflation rate in the past 2 years had a positive relationship with investment, and economic growth also had a positive relationship with investment. 3) The effect of interest rates on consumption found that interest rates have a positive relationship with consumption, and difference in inflation rates have a positive relationship with consumption. Difference in oil prices had a negative relationship with consumption. 4) The results of using 2SLS to manage the endogeneity problem show that the interest rate estimates are a very good proxy for the long-term relationship.