Show simple item record

Living with Higher Interest Rates: Is Asia Ready?

dc.contributor.authorCyn-Young Park
dc.date.accessioned2015-02-06T15:55:47Z
dc.date.available2015-02-06T15:55:47Z
dc.date.issued2004-08-15
dc.identifier.issn1655-5260
dc.identifier.urihttp://hdl.handle.net/11540/2163
dc.description.abstractThe Federal Reserve (the Fed) raised its policy rate by 25 basis points on 30 June 2004 and is expected to continue a series of rate hikes in its subsequent monetary policy meetings over the next 18 months or so (US Federal Reserve Board 2004). Higher interest rates in the United States (US) can adversely affect Asian economies by reducing aggregate demand through various channels. First, higher yields on US assets attract capital, thus reversing international capital flows. Heightened uncertainty combined with declining international liquidity and weakening currency conditions add to volatility in emerging markets, further hiking risk premia and therefore increasing the cost of capital. Second, the transmission of higher US interest rates through international capital markets yields higher domestic rates, exerting a downward pressure on domestic investment and consumption. Global transmission of interest rates is found to be significant for developing countries (Frankel et al. 2002). Empirical evidence shows that local interest rates in Asian developing economies respond to short-term US rates in a strongly positive manner regardless of existing exchange rate regimes. Third, higher interest rates may curb global consumption spending, hence reducing external demand for Asian exports. A long period of very low interest rates created a legacy of increased leverage and inflated asset prices around the world, leaving global consumption particularly vulnerable to rate hikes.
dc.languageEnglish
dc.publisherAsian Development Bank
dc.rightsCC BY 3.0 IGO
dc.rights.urihttp://creativecommons.org/licenses/by/3.0/igo
dc.titleLiving with Higher Interest Rates: Is Asia Ready?
dc.typeBriefs
dc.subject.expertMacroeconomic
dc.subject.expertMacroeconomic Analysis
dc.subject.expertMacroeconomic Framework
dc.subject.expertMacroeconomic Models
dc.subject.expertMacroeconomic Performance
dc.subject.expertMacroeconomic Planning
dc.subject.expertMacroeconomic Policies
dc.subject.expertMacroeconomic Reform
dc.subject.expertMacroeconomic Stabilization
dc.subject.adbSocial condition
dc.subject.adbEconomic dependence
dc.subject.adbEconomic assistance
dc.subject.adbInternational monetary relations
dc.subject.adbInternational monetary relations
dc.subject.adbInternational trade
dc.subject.adbNational accounting
dc.subject.adbMarket
dc.subject.naturalExchange
dc.subject.naturalComparative economics
dc.subject.naturalIndex number
dc.subject.naturalMonetary policy
dc.subject.naturalValue analysis
dc.subject.naturalAdjustment cost
dc.subject.naturalTransaction cost
dc.subject.naturalConditionality
dc.subject.naturalInternational relations
dc.title.seriesERD Policy Briefs
dc.title.volumeno 30
dc.contributor.imprintAsian Development Bank
oar.themeEconomics
oar.adminregionAsia and the Pacific Region
oar.countryBangladesh
oar.countryBhutan
oar.countryIndia
oar.countryMaldives
oar.countryNepal
oar.countrySri Lanka
oar.countryBrunei Darussalam
oar.countryCambodia
oar.countryIndonesia
oar.countryLao People's Democratic
oar.countryMalaysia
oar.countryMyanmar
oar.countryPhilippines
oar.countrySingapore
oar.countryThailand
oar.countryViet Nam
oar.countryCook Islands
oar.countryFiji Islands
oar.countryKiribati
oar.countryMarshall Islands
oar.countryFederated States of Micronesia
oar.countryNauru
oar.countryPalau
oar.countryPapua New Guinea
oar.countrySamoa
oar.countrySolomon Islands
oar.countryTimor-Leste
oar.countryTonga
oar.countryTuvalu
oar.countryVanuatu
oar.countryAfghanistan
oar.countryArmenia
oar.countryAzerbaijan
oar.countryGeorgia
oar.countryKazakhstan
oar.countryKyrgyz Republic
oar.countryPakistan
oar.countryTajikistan
oar.countryTurkmenistan
oar.countryUzbekistan
oar.countryPeople's Republic of China
oar.countryHong Kong
oar.countryChina
oar.countryRepublic of Korea
oar.countryMongolia
oar.countryTaipei,China
oar.identifierOAR-001884
oar.authorPark, Cyn-Young
oar.importtrue
oar.googlescholar.linkpresenttrue


Files in this item

Thumbnail

This item appears in the following Collection(s)

  • Project, Partnership, Policy and Sector Briefs
    The Asian Development Bank publishes various briefs about its projects, partnerships, and policies in different sectors in different countries. The aim of these briefs is to inform readers about developments, thematic and sector research, economic reports, partnership updates, or policy and strategy issues in a quick-disseminating format.

Show simple item record

Users also downloaded