Real interest rates and productivity in small open economies

Tommaso Monacelli, Luca Sala and Daniele Siena

Journal of International Economics, 2023, vol. 142, issue C

Abstract: We construct factor utilization-adjusted measures of aggregate TFP for a sample of advanced (AEs) and emerging market small open economies (EMEs). We estimate the effects of real interest rate shocks on TFP and GDP using structural VARs. The results are starkly different in the two groups of countries. While TFP is pro-cyclical in both sets of countries, lower real interest rates - a proxy for capital inflows - lead to productivity booms in EMEs, whereas they lead to a contraction in productivity in AEs.

Keywords: Aggregate productivity; Real interest rates; Capital inflows; Structural VARs (search for similar items in EconPapers)
JEL-codes: F32 F41 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Real Interest Rates and Productivity in Small Open Economies (2018)
Working Paper: Real Interest Rates and Productivity in Small Open Economies (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:142:y:2023:i:c:s0022199623000326

DOI: 10.1016/j.jinteco.2023.103746

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