Fed Economists: US Rate Hikes Likely to Hit Emerging Economies Hard

Write : 2018-05-13 14:19:57 Update : 2018-05-13 14:21:18

Fed Economists: US Rate Hikes Likely to Hit Emerging Economies Hard

Researchers at the United States Federal Reserve suggested that higher U.S. interest rates may reduce the gross domestic product (GDP) of emerging nations.

Fed economists Matteo Iacoviello and Gaston Navarro presented the suggestion in their recent paper.

The researchers said that a monetary policy-induced rise in U.S. rates of 100 basis points reduces GDP in advanced economies and in emerging economies by point-five and point-eight percent, respectively, after three years.

They claimed that the U.S. rate hike of one percentage point also reduce U.S. GDP by about point-seven percent after two years.

The two economists said that their findings highlight both the bright and the dark side of foreign responses to U.S. interest rate increases, but foreign economies, especially vulnerable, emerging economies, may react to U.S. monetary shocks more so than the U.S. economy itself.

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