The Impact of Federal Reserve’s Interest Rate Policy on US Semiconductor Industry

Abstract

The Federal Reserve raised interest rates by 75BP in June. In the meantime, the American government has enacted laws and orders to promote the growth of the semiconductor sector [4]. The purpose of this essay is to assess how the Federal Reserve's interest rate policy has affected the US semiconductor industry. To determine whether it has a beneficial or negative impact on the industry, this research uses the VAR model. This study projects the yield and volatility of semiconductors using the ARMA-GARCH model. The findings demonstrate that raising interest rates encourages greater investment in the stock market, which is advantageous for the semiconductor sector. But as time passes, the yield's volatility rises as well. This paper provides the reason that since the US chip sector has long had a dominant position, chip demand is not price elastic, and the strengthening of the currency is insufficient to reduce chip demand. The outcome is dominated by net capital inflows.