We construct factor utilization-adjusted measures of aggregate TFP for a sample of advanced (AEs) and emerging market small open economies (EMEs). We estimate the effects of real interest rate shocks on TFP and GDP using structural VARs. Results are starkly different in the two groups of countries. While TFP is pro-cyclical in both sets of countries, lower real interest rates - a proxy for capital inflows - lead to productivity booms in EMEs, whereas they lead to a contraction in productivity in AEs.