Choose a historical crisis or build your own scenario. Watch how interest-rate shocks ripple through an economy — from asset prices to GDP.
| Indicator | Start | End | Change | What it means |
|---|
When a central bank changes rates, the rate gap (actual rate minus neutral rate r*) ripples through the economy. The shock decays over time — just like in reality. Here are the five main channels:
| What Changes | Why | Academic Source |
|---|---|---|
| Asset prices | Higher rates make future profits worth less today (discounting) | Bernanke & Kuttner (2005) |
| Inflation falls | Higher rates cool demand, reducing price pressure over time | Taylor (1993) — the Taylor Rule |
| Purchasing power | Lower inflation preserves what your money buys | Fisher (1930) |
| People save more | Higher rates reward saving over immediate spending | Hall (1988) |
| Firms invest less | Borrowing costs rise, so fewer projects are profitable | Mishkin (1995) |
| GDP slows | Less investment + less consumption = slower overall output | Romer (2012) — Advanced Macroeconomics |
| Currency strengthens | Foreign investors chase higher yields, buy domestic currency | Mundell (1963), Fleming (1962) |
| Exports fall, imports rise | Strong currency makes domestic goods expensive abroad | Mundell-Fleming model |