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Global transmission of interest rates: monetary independence and currency regime

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Listed author(s):
  • Frankel, Jeffrey
  • Schmukler, Sergio L.
  • Serven, Luis

Abstract

Using 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.

(This abstract was borrowed from another version of this item.)

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Article provided by Elsevier in its journal Journal of International Money and Finance.

Volume (Year): 23 (2004)
Issue (Month): 5 (September)
Pages: 701-733

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Handle: RePEc:eee:jimfin:v:23:y:2004:i:5:p:701-733
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30443

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Find related papers by JEL classification:
  • F31 - International Economics - - International Finance - - - Foreign Exchange
  • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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  2. Pesaran, M.H. & Shin, Y., 1995. "An Autoregressive Distributed Lag Modelling Approach to Cointegration Analysis," Cambridge Working Papers in Economics 9514, Faculty of Economics, University of Cambridge.
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