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What drives the global official/policy interest rate?

Ratti, RA and Vespignani, JL ORCID: 0000-0003-0265-4377 2019 , 'What drives the global official/policy interest rate?' , Applied Economics, vol. 51, no. 47 , pp. 5185-5190 , doi: 10.1080/00036846.2019.1610716.

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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.

Item Type: Article
Authors/Creators:Ratti, RA and Vespignani, JL
Keywords: global interest rate, global monetary aggregates, oil prices, GFAVAR
Journal or Publication Title: Applied Economics
Publisher: Routledge Taylor & Francis Ltd
ISSN: 0003-6846
DOI / ID Number: 10.1080/00036846.2019.1610716
Copyright Information:

Copyright 2019 Informa UK Limited, trading as Taylor & Francis Group

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