Impact of Monetary Aggregates on Consumer Behavior: A Study on the Policy Response of the Federal Reserve against COVID-19

Kılcı E. N., Yılancı V.

Applied Economics Journal, vol.29, no.1, pp.100-122, 2022 (ESCI)

  • Publication Type: Article / Article
  • Volume: 29 Issue: 1
  • Publication Date: 2022
  • Journal Name: Applied Economics Journal
  • Journal Indexes: Emerging Sources Citation Index (ESCI)
  • Page Numbers: pp.100-122
  • Çanakkale Onsekiz Mart University Affiliated: Yes


Consumers have tended to sharply decrease their spending during the COVID-19 pandemic due to pessimistic expectations related to the economic outlook, concerns about their jobs, and a decline in incomes. The Federal Reserve has taken several measures in response to the pandemic, resulting in increases in the money supply and asset sizes. This study aims to analyze the impact of monetary aggregates on consumer behavior before and after the pandemic by employing the bootstrap autoregressive distributed lag (ARDL) cointegration test with an exogenous structural break. The US money supply (M3) and total assets are used as dependent variables and consumer expenditure, consumer credit, and consumer sentiment are the independent variables. The data employed cover the period from January 2003 to August 2020. The results show cointegration relationships among consumer expenditure, the US money supply (M3), and total assets. The effect of the FED’s policy response on consumer behavior has strengthened after the pandemic.