Determining Affecting Macroeconomic Indicators on Interest Rates in Emerging Countries: A Comparative Examination upon China, Brazil, and Turkey with Multivariate Adaptive Regression Splines (MARS)

Abstract

China, Brazil, and Turkey are important emerging countries and have different interest rate trends. China and Brazil enjoyed the lower interest rate of approximately 1.5% and 6.8% respectively whereas Turkey was faced with increasing interest rate problems reaching 23.35% as of 2018 end. The study aims to analyze and define macroeconomic determinants of interest rates. 11 independent variables, yearly data between 2002 and 2018 were examined with the MARS method. The study determines that growth and reserves have effects in China; credits and net export have effects in Brazil whereas inflation and money supply are influential in Turkey on interest rates.

Keywords: Interest Rate, Macroeconomic Determinants, MARS, China, Brazil, Turkey

JEL Classification: C22, E43, G20, N20