01894cas a2200253 a 4500 AALejournalIMF013717 230101c9999 xx r poo 0 0eng d 5.00 USD 9781484394502 1018-5941 BD-DhAAL BD-DhAAL Dell'Erba, Salvatore. Does Fiscal Policy Affect Interest Rates? : Evidence from a Factor-Augmented Panel / Salvatore Dell'Erba, Sergio Sola. Washington, D.C. : International Monetary Fund, 2013. 1 online resource (44 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students This paper reconsiders the effects of fiscal policy on long-term interest rates employing a Factor Augmented Panel (FAP) to control for the presence of common unobservable factors. We construct a real-time dataset of macroeconomic and fiscal variables for a panel of OECD countries for the period 1989-2012. We find that two global factors-the global monetary and fiscal policy stances-explain more than 60 percent of the variance in the long-term interest rates. Compared to the estimates from models which do not account for global factors, we find that the importance of domestic variables in explaining long-term interest rates is weakened. Moreover, the propagation of global fiscal shocks is larger in economies characterized by macroeconomic and institutional weaknesses. Mode of access: Internet Sola, Sergio. IMF Working Papers; Working Paper ; No. 2013/159 Full text available on IMF http://elibrary.imf.org/view/journals/001/2013/159/001.2013.issue-159-en.xml IMF e-Library