Global Transmission of Interest Rates: Monetary Independence and Currency Regime
AbstractUsing a large sample of developing and industrialized economies during 1970-1999, this paper explores whether the choice of exchange rate regime affects the sensitivity of local interest rates to international interest rates. In most cases, we cannot reject full transmission of international interest rates in the long run, even for countries with floating regimes. Only large industrial countries can benefit, or choose to benefit, from independent monetary policy. However, short-run effects differ across regimes. Dynamic estimates show that interest rates of countries with more flexible regimes adjust more slowly to changes in international rates.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8828.
Date of creation: Mar 2002
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Other versions of this item:
- Frankel, Jeffrey & Schmukler, Sergio L. & Serven, Luis, 2004. "Global transmission of interest rates: monetary independence and currency regime," Journal of International Money and Finance, Elsevier, vol. 23(5), pages 701-733, September.
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-04-15 (All new papers)
- NEP-IFN-2002-04-15 (International Finance)
- NEP-LAM-2002-04-03 (Central & South America)
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