The Impact of Fiscal Policies on Consumers’ Spending

Abstract:     
The economic impasse experienced in the UK is being counteracted by aggressive fiscal policies geared toward encouraging spending on consumables. Using the retail price index and data obtained from the Office of Natural Statistics this paper assessed the effectiveness of the government’s fiscal measures to stabilize the economy through spending. The article developed a consumer spending model (CSM) and assessed it impact on intrinsic fiscal policies such as bank rate, inflation, percentage earnings increase and mortgage rate. The study finds bank rate and annual inflation as most significant factors in affecting consumer spending and suggests that fiscal measures targeted at reducing bank lending rates and controlling inflation should be the government’s policy priority.

Keywords: Bank Rate, Spending, Mortgage Rate

JEL Classification: G18, G21, G28

working papers series