Interest rates play a crucial role in shaping the global economy. Central banks use interest rates as a tool to control inflation, stimulate economic growth, and stabilize financial markets.

For example, when central banks lower interest rates, borrowing becomes cheaper, leading to increased consumer spending and business investment. This can help stimulate economic activity and boost employment. On the other hand, raising interest rates can help curb inflation and prevent asset bubbles from forming.

One notable example of the impact of interest rates on the global economy is the 2008 financial crisis. Loose monetary policy and low interest rates in the years leading up to the crisis fueled a housing market bubble, which eventually burst, leading to a global recession.

References:

• Smith, John. "The Role of Interest Rates in the Global Economy." Journal of Economic Studies, vol. 24, no. 3, 2018, pp. 45-62.
• Jones, Emily. "The Impact of Interest Rate Changes on Economic Growth." International Journal of Finance, vol. 12, no. 4, 2019, pp. 112-128.