TY  - JOUR
AU  - Giovanni,Julian di
AU  - Shambaugh,Jay C.
TI  - The Impact of Foreign Interest Rates on the Economy: The Role of the Exchange Rate Regime
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13467
PY  - 2007
Y2  - October 2007
UR  - http://www.nber.org/papers/w13467
L1  - http://www.nber.org/papers/w13467.pdf
N1  - Author contact info:
Julian di Giovanni
Research Department
International Monetary Fund
700 19th Street NW
Washington, DC 20431
Tel: 202/623-7558
Fax: 202/589-7558
E-Mail: julian.digiovanni@utoronto.ca

Jay C. Shambaugh
McDonough School of Business
Georgetown University
542 Hariri
Washington, DC 20057
Tel: 202/687-6625
E-Mail: jcs264@georgetown.edu
AB  - 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.
ER  -