Spillovers of U.S. Fiscal Challenges: The Global Impact of U.S. Fiscal Dominance Concerns on Interest Rates in Emerging and Developed Markets

Joshua Aizenman, William Eldén, Yothin Jinjarak, Gazi Uddin and Frida Widholm

No 32868, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This study examines the international spillovers of U.S. inflationary spells and fiscal concerns on policy interest rates in Emerging Market Economies (EMEs) and Developed Economies (DEs). Previous research has focused on fiscal concerns in domestic environments, overlooking cross-border impacts. Using data from EMEs and DEs, we construct a novel index of fiscal dominance concerns through Principal Components Analysis to capture international fiscal dynamics. The results are confirmed by robustness analysis and show that greater U.S. fiscal challenges affect negatively the policy rates in both EMEs and DEs, with a greater impact observed in EMEs. Moreover, a low degree of financial repression in EMEs is associated with more significant spillover effects from greater U.S. fiscal challenges. Our findings offer insights into the complex interplay between financial repression, central bank independence, and global market integration in shaping a country's resilience to international financial influences.

JEL-codes: E31 E62 F33 F42 (search for similar items in EconPapers)
Date: 2024-08
New Economics Papers: this item is included in nep-ifn and nep-opm
Note: IFM
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.nber.org/papers/w32868.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:32868

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w32868
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().