Real interest rates, saving and investment

Smith, J. C. (Jennifer C.) (1996) Real interest rates, saving and investment. Working Paper. University of Warwick, Department of Economics, Coventry.

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Abstract

This paper investigates the determinants of real interest rates at world and country level. The starting point is the idea that real interest rates reflect the interaction of desired saving and planned investment, using the framework developed by Barro and Sala-i-Martin (1990) and Barro (1992). The paper updates previous results and extends the analysis to study long real interest rates. We analyse which factors have been responsible for real rate `regime shifts' during 1959 to 1992. We examine the determinants of interest rate differentials across ten major industrialised countries and provide estimates of the extent of capital market integration.

Item Type:Working or Discussion Paper (Working Paper)
Subjects:H Social Sciences > HG Finance
H Social Sciences > HB Economic Theory
Divisions:Faculty of Social Studies > Economics
Library of Congress Subject Headings (LCSH):Interest rates, Saving and investment, Capital market, Investments, Monetary policy
Series Name:Warwick economic research papers
Publisher:University of Warwick, Department of Economics
Place of Publication:Coventry
Date:March 1996
Number:No.454
Number of Pages:49
Status:Not Peer Reviewed
Access rights:Open Access
References:Barro, Robert J. (1992), \World interest rates and investment," Scandinavian Journal of Economics, 94 (2), 323{42. Barro, Robert J. and Xavier Sala-i-Martin (1990), \World real interest rates," in Blanchard, Olivier J. and Fisher, Stanley (eds.), NBER Macroeconomics Annual, Cambridge, MA: MIT Press. Christiano, Lawrence J. and Martin Eichenbaum (1992), \Liquidity effects and the monetary transmission mechanism," NBER Working Paper No 3974 (January). Blanchard, Olivier J. (1985), \Debt, deficits and finite horizons," Journal of Political Economy, 93 (2), 223-47. Ford, Robert and Douglas Laxton (1995), \World public debt and real interest rates," IMF Working Paper No WP/95/30 (March). G10 Deputies (1995), \Saving, investment and real interest rates," A Study for Ministers and Governors of the G10 Countries, (October). Jenkinson, Nigel H. (1996), \Saving, investment and real interest rates," Bank of England Quarterly Bulletin, 36 (1), 51{62. Summers, Robert and Alan Heston (1991), \The Penn World Table (Mark 5): An Expanded Set of International Comparisons, 1950-1988," Quarterly Journal of Economics, 106 (2), 327{68.

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