EconPapers    
Economics at your fingertips  
 

Do long-term interest rates drive GDP and inflation in small open economies? Evidence from Poland

Grzegorz Wesoƚowski
Authors registered in the RePEc Author Service: Grzegorz Wesołowski

Applied Economics, 2018, vol. 50, issue 57, 6174-6192

Abstract: This article investigates the impact of long-term interest rates on macroeconomic variables in a small open economy. It shows that the time-varying term premium stabilizes GDP without affecting significantly inflation volatility in Poland – a typical open economy with flexible exchange rate. This conclusion is drawn from an estimated dynamic stochastic general equilibrium model in which segmented asset markets and imperfect asset substitutability give rise to the time-varying term premium in the long-term interest rate. Furthermore, the impulse response analysis of the model reveals that the term premium stabilizes GDP when the small economy is hit by shocks that are absent in closed economy models (country risk premium and export preference) which points to the different impact of the term premium on relatively close (large) and open (small) economies.

Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://hdl.handle.net/10.1080/00036846.2018.1489507 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Do long term interest rates drive GDP and inflation in small open economies? Evidence from Poland (2016) Downloads
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:taf:applec:v:50:y:2018:i:57:p:6174-6192

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().

 
Page updated 2019-09-20
Handle: RePEc:taf:applec:v:50:y:2018:i:57:p:6174-6192