What drives the global official/policy interest rate?

Ronald A. Ratti, Joaquin L. Vespignani*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

We construct a GFAVAR model with newly released global data from the Federal Reserve Bank of Dallas to investigate the drivers of global official/policy interest rate. We find that 66% of movement in global official/policy interest rates is attributed to changes in global monetary aggregates (23%), oil prices (19%), global output (16%) and global prices (8%). Global official/policy interest rates respond significantly to increases in global output, inflation and oil prices. Increases in global policy interest rates are associated with reductions in global prices and global output. The response in official/policy interest rate for the emerging countries is more to global inflation, for the advanced countries (excluding the U.S.) is more to global output, and for the U.S. is to both global output and inflation.

Original languageEnglish
Pages (from-to)5185-5190
Number of pages6
JournalApplied Economics
Volume51
Issue number47
DOIs
Publication statusPublished - 8 Oct 2019

Fingerprint

Dive into the research topics of 'What drives the global official/policy interest rate?'. Together they form a unique fingerprint.

Cite this