The Role of Interest Rates in Business Cycle Fluctuations in Emerging Market Countries: The Case of Thailand

 
Author/Editor: Tchakarov, Ivan ; Elekdag, Selim
 
Publication Date: May 01, 2006
 
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
 
Summary: Emerging market countries have enjoyed an exceptionally favorable economic environment throughout 2004, 2005, and early 2006. In particular, accommodative U.S. monetary policy in recent years has helped create an environment of low interest rates in international capital markets. However, if world interest rates were to take a sudden upward course, this would lead to less hospitable financing conditions for emerging market countries. The purpose of this paper is to measure the effects of world interest rate shocks on real activity in Thailand. The analysis incorporates balance sheet related credit market frictions into the IMF’s Global Economy Model (GEM) and finds that Thailand would best minimize the adverse effects of rising world interest rates if it were to follow a flexible exchange rate regime.
 
Series: Working Paper No. 06/110
Subject(s): Interest rates | Thailand | Business cycles | Emerging markets | Exchange rate regimes | International trade | Economic models

Author's Keyword(s): Exchange rate regime | global economy model | Thailand
 
English
Publication Date: May 01, 2006
ISBN/ISSN: 0 / 1934-7073 Format: Paper
Stock No: WPIEA2006110 Pages: 24
Price:
US$15.00 (Academic Rate:
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