The Impact of Foreign Interest Rates on the Economy: The Role of the Exchange Rate Regime
By J. D. Giovanni, Jay C. Shambaugh. Social Science Research Network, 2006
222 citations recorded by the source corpus.
It is often argued that many economies are affected by conditions in foreign countries. This paper explores the connection between interest rates in major industrial countries and annual real output growth in other countries. The results show that high foreign interest rates have a contractionary effect on annual real GDP growth in the domestic economy, but that this effect is centered on countries with fixed exchange rates. The paper then examines the potential channels through which major-country interest rates affect other economies. The effect of foreign interest rates on domestic interest rates is the most likely channel when compared with other possibilities, such as a trade effect.
Subfields: Economics and Econometrics, Finance
View Paper: https://www.semanticscholar.org/paper/ca55993c08745aa24960b2bea00b0735bea2e630
How researchers see this paper
The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.
In Economics and Econometrics
- Matteo Iacoviello
- Gaston Navarro
- G. Rivolta
- Luca Dedola
- Georgios P. Georgiadis
- Livio Stracca
- C. Offermanns
- Michael Hachula
In Finance
- Matteo Iacoviello
- Gaston Navarro
- G. Rivolta
- Luca Dedola
- Georgios P. Georgiadis
- Livio Stracca
- C. Offermanns
- Michael Hachula
Citations in the corpus
- Determinants of Global Spillovers from US Monetary Policy (2015, background): “In order to shed light on the determinants of the output spillovers from US monetary policy, I consider cross-sectional regressions of the spillovers depicted in Figure 1 and denoted by si (9)di Giovanni and Shambaugh (2008) focus on changes in interest rates in countries’ base country, which includ”
- Foreign effects of higher U.S. interest rates (2019, background): “Di Giovanni and Shambaugh (2008) find that high foreign interest rates have a contractionary effect on real GDP in the domestic economy, but that this effect is centered on countries with fixed exchange rates. 7. Georgiadis (2016)’s recent study is closely related to ours.”
- If the Fed Sneezes, Who Catches a Cold? (2017, methodology): “We prefer to pursue a different approach for several reasons.(12) First, our approach does not require literally imposing the same identifying assumptions as in GK.”
- A Tie That Binds: Revisiting the Trilemma in Emerging Market Economies (2017, unknown): “…several relevant domestic and global variables, country-fixed effects, and time effects to control for 30These results are similar to those of di Giovanni and Shambaugh (2008), who show that interest rate independence allows countries with flexible exchange rates to experience smaller…”
- Questioni di Economia e Finanza (2010, unknown): “This evidence may also suggest that these employees are more likely to move from one job to another, possibly experiencing better working conditions in their new positions.”