Long-Term Capital Movements



37

Table 7. Real Interest Rates and Real interest Differentials
Panel DOLS regressions with fixed time and country effects

A. Real interest rate

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

RDIF

1970-98

RDIF

1970-98

RDIF

1980-98

RDIF

1980-98

RDIF

1970-98

RDIF

1970-98

RDIF

1980-98

RDIF

1980-98

NFAZexports

-1.06

-0.83

-1.36

-0.91

-1.5

-1.63

-2.87

-2.81

(2.6)*

(2.0)*

(2.48)*

(1.66)

(2.45)*

(2.94)**

(4.48)**

(4.65)**

Public debt

3.82

7.1

2.98

3.56

(2.1)*

(3.4)**

(2.03)*

(1.91)*

D(RER)

0.03

0.04

0.02

2.64

(1.2)

(1.74)

(.9)

(1.23)

Adjusted R2

0.5

0.56

0.36

0.39

0.54

0.59

0.43

0.46

Countries

21

21

21

21

21

21

21

21

Observations

462

410

362

336

442

410

358

336

B. Real interest differential

(1)         (2)         (3)         (4)         (5)         (6)         (7)         (8)

RDIF

1970-98

RDIF

1970-98

RDIF

1980-98

RDIF

1980-98

RDIF

1970-98

RDIF

1970-98

RDIF

1980-98

RDIF

1980-98

NFAZexports

-2.54

-2.44

-2.73

-2.22

-2.57

-2.77

-3.19

-3.24

(5.41)**

(5.5)**

(4.3)**

(4.58)**

(4.03)**

(4.27)**

(4.83)**

(5.52)**

Public debt

3.18

7.79

2.23

3.18

(1.76)

(4.82)**

(1.51)

(1.67)

D(RER)

-0.04

-0.014

0.012

0.015

(2.15)*

(.78)

(.54)

(.66)

Adjusted R2

0.58

0.59

0.6

0.64

0.6

0.59

0.63

0.67

Countries

21

21

21

21

21

21

21

21

Observations

423

403

344

338

416

386

340

319

*Sample is Industrial Countries, with exception of Iceland. In panel A, dependent variable is the
real interest rate; in panel B, dependent variable is real interest differential vis-à-vis the US. In
regressions (1)-(4), CUMCA is employed as measure of NFA; in regressions (5)-(8), it is based
on fitted value from regression of NFA on GDP per capita, public debt and demographic
variables. In regressions (2), 4), (6) and (8), multivariate real exchange rate is employed in panel
A and bivariate real exchange rate vis-à-vis the US in panel B. * (**) indicates statistical
significance atthe 5% (1%) confidence level.



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