Efficacy of Monetary Policy in Curtailing Consumption: Empirical Evidence from Fiji

Should Reserve Bank of Fiji (RBF) use rate of interest to control private consumption expenditure in Fiji? This paper investigates whether rate of interest is an appropriate monetary policy instrument to reduce consumption in Fiji. Results indicate that interest rate has no effect on private consumption. The appropriate monetary policy stance is targeting the availability of consumer credit, if RBF intends to maintain the internal and external balance, because demand for money is stable.