THE ECONOMETRICS OF MACROECONOMIC MODELLING
Interest rates for government bonds RBOt and bank loans RLt
Finally, the model consists of two interest rate equations. Before the deregulation, so st = 0, changes in the bond rate RBOt are an autoregressive process, corrected for politically induced changes modelled by a composite dummy.
ARBOt = 0.12ARBOt_ i + 0.30sARSt + 0.95 sARWt (0.04) (0.03) (0.07)
— 0.02s • ecmRBo t-1 + 0.011RBOdumt (9.12)
(0.01) (0.001)
T = 1972(4)-2001(1) = 114
<r = 0.18%
Far(i-S)(5, 104) = 0.83[0.53]
Xnormality (2) = 0.46[0.80]
Fhetx2 (10,98) = 1. 61[0.11]
(Reference: see Table 9.2. The numbers in [..] are p-values.) where
RBOdumt = [*74q2 + 0.9*77q4 — 0.6*78q1 + 0.6*79q4 + *80q1 + *81q1 + *82q1 + 0.5*86q1 — 1.2*89q1]t.
After the deregulation, the bond rate reacts to the changes in the money - market rate sARSt as well as the foreign rate sARWt, with the long-run effects represented by the equilibrium-correcting term:
ecm. RBo, t-i = (RBO — 0.6RS — 0.75RW)t_i.
The equation for changes in the bank loan rate ARLt is determined in the short run by changes in the bond rate, with additional effects from changes in the money-market rate sARSt after the deregulation.
ARLt = — 0.0007 + 0.09 ARLt_ 1 + 0.37 sARSt + 0.11 ARBOt_ 1 (0.0002) (0.03) (0.03) (0.035)
— 0.29 s • ecmRL t_i + 0.001 s66t + 0.012 RLdumt (9.13)
(0.03) (0.0003) (0.001)
T = 1972(4)-2001(1) = 114
<7 = 0.15%
Far(i-5)(5, 102) = 1.01[0.42]
X2normality(2) = 1.04[0.59]
FHETx2(11, 95) = 0.89[0.55].
(Reference: see Table 9.2. The numbers in [..] are p-values.)
Again a rather elaborated composite dummy is needed in order to obtain white noise residuals
RLdumt = [i78q1 + 0.5i80q3 + 0.75i81q2 + 0.5i86q1 — 86q2
+ 0.75i86q4 — 0.5i89q1 — 89q3 — 0.67i92q4 + 2i98q3]t.
In the long run, the pass-through of effects from both the money-market rate and the bond rate are considerably higher:
ecm-RL, t-i = (RL — 0.8RS — 0.5RBO)t_1.
