Comovements Between Foreign and Domestic Interest Rates

Author(s): Grenade, Kari; Moore, Winston (2006)

Created 01 Jan, 2006
Categories Working Papers
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Economic theory posits that in a fixed exchange rate regime with unrestricted capital flows, domestic interest rates must track closely those of the country to which the currency is pegged. This paper empirically tests this theory by investigating the sensitivity of interest rates in the Eastern Caribbean Currency Union (ECCU) to changes in the US rates.

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