The Categorization of Small Open Economies and the Response to Foreign Interest Rate Shocks: Based on Financial Integration and Net External Credit |
| |
Authors: | Young Moo Cho |
| |
Institution: | LG Economic Research Institute, Seoul 150-721, South Korea |
| |
Abstract: | To analyze precisely effects of foreign interest rate hike shocks, this paper categorizes small open economies into four kinds of types based on the net external credit (or debt) level and the financial integration level. The empirical result shows that responses of macroeconomic variables tend to differ substantially depending on the type of a small open economy. These findings imply that we need to consider the net external credit (or debt) level and the financial integration level of a small open economy when we predict the effect of a foreign interest rate hike shock. |
| |
Keywords: | Foreign interest rate shocks categorization of small open economies net external credit (or debt) financial integration panel VAR |
|