The Impact Of Developed Countries' Interest Rates Variation On The Economy Of Developing Countries

A lot of scholars have already studied the influence of monetary policies (interest rate fluctuations) on domestic economy or other economies using various kinds of models. But this paper's angle is quite different from theirs.Based on the theory of Interest Rate Transmission Mechanism, this paper studied the impact of developed countries'interest rate variation on the economy of developing countries. Developed countries in this paper concern the U.S.A., the UK and Germany. Developing countries in this paper concern China, India, Indonesia, Thailand, the Philippines, Pakistan, Egypt, Morocco, Argentina, Venezuela, Chile, Sri Lanka, Brazil, Malaysia, Algeria, Colombia, Peru, Zimbabwe.According to the macro-economic data from 1973 to 2002, this paper explores the connection between developed countries'interest rates variation and annual GDP growth of developing countries using panel data model. The results show that developed countries'interest rates don't necessarily have an international transmission effect on the economy of developing countries in theory. This is mainly because that different developed countries implement distinctive monetary policies. And this paper also studies the influence that developed countries'interest rates variation exert on the economy of China and Indonesia individually through time series analysis and multiple regression method. The results show that there is a positive correlation between developed countries'interest rate variation and China's GDP growth, and there is a negative correlation between developed countries'interest rate variation and Indonesia's GDP growth. This is mainly because that China has low-level capital opening, but Indonesia has high-level capital opening.