Long-Term Capital Movements



38

Table 8. Real Interest Rates And Real Interest Differentials: Cross-Section Evidence

A. Real interest rate

(1)

(2)

(3)

(4

RINT 1990-98

RINT 1990-98

RINT 1990-98

RINT 1990-98

_

NFAZexports

-0.88

-0.88

-1.2

-ΓT18

(2.6)*

(2.68)*

(5.39)**

(5.28)**

Public debt

1.57

1.31

(1.55)

(1.67)

D(RER)

-0.19

-0.19

(0.9)

(1.1)

Adjusted R2

0.31

0.35

0.49

0.52

Countries

21_____________

21_____________

21_____________

21_______________

B. Real interest differential

(1)

(2)

(3)

(4)

RDIF 1990-98

RDIF 1990-98

RDIF 1990-98

RDIF 1990-98

_

NFAZexports

-1.07

-1.07

-127

-126

(3.62)**

(4.12)**

(6.61)**

(8.21)**

Public debt

1.72

1.33

(1.8)

(1.7)

D(RER)

-0.08

-0.1

(.43)

(.72)

Adjusted R2

0.54

0.59

0.65

0.68

Countries______

20____________

20____________

20____________

20_____________

* Sample is Industrial Countries, with exception of Iceland. 1990-98 averaged data. 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)-(2), CUMCA is employed as measure of NFA; in
regressions (3)-(4) it is based on fitted value from regression of NFA on GDP per capita, public
debt and demographic variables. In regressions (2) and (4), 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 at the 5% (1%) confidence level.



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