Global Transmission of Interest Rates: Monetary Independence and Currency Regime

46 Pages Posted: 8 Mar 2002 Last revised: 26 Oct 2010

See all articles by Jeffrey A. Frankel

Jeffrey A. Frankel

Harvard University - Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER)

Sergio L. Schmukler

World Bank - Development Research Group (DECRG)

Luis Servén

World Bank - Development Research Group (DECRG)

Multiple version iconThere are 3 versions of this paper

Date Written: March 2002

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.

Suggested Citation

Frankel, Jeffrey A. and Schmukler, Sergio and Servén, Luis, Global Transmission of Interest Rates: Monetary Independence and Currency Regime (March 2002). NBER Working Paper No. w8828. Available at SSRN: https://ssrn.com/abstract=303550

Jeffrey A. Frankel (Contact Author)

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Mailbox 22
Cambridge, MA 02138
United States
617-496-3834 (Phone)
617-496-5747 (Fax)

HOME PAGE: http://www.ksg.harvard.edu/fs/jfrankel

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Sergio Schmukler

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN MC 3-301
Washington, DC 20433
United States
202-458-4167 (Phone)
202-522-3518 (Fax)

HOME PAGE: http://www.worldbank.org/en/about/people/s/sergio-schmukler

Luis Servén

World Bank - Development Research Group (DECRG)

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
43
Abstract Views
1,008
PlumX Metrics