Do Differences in Financial Development Explain the Global Pattern of Current Account Imbalances?

Joseph W. Gruber and Steven B. Kamin^*

NOTE: International Finance Discussion Papers are preliminary materials circulated to stimulate discussion and critical comment. References in publications to International Finance Discussion Papers (other than an acknowledgment that the writer has had access to unpublished material) should be cleared with the author or authors. Recent IFDPs are available on the Web at http://www.federalreserve.gov/pubs/ifdp/. This paper can be downloaded without charge from the Social Science Research Network electronic library at http://www.ssrn.com/.

Abstract:

This paper addresses the popular view that differences in financial development explain the pattern of global current account imbalances. One strain of thinking explains the net flow of capital from developing to industrial economies on the basis of the industrial economies' more advanced financial systems and correspondingly more attractive assets. A related view addresses why the United States has attracted the lion's share of capital flows from developing to industrial economies; it stresses the exceptional depth, breadth, and safety of U.S. financial markets.

In this paper we empirically test these hypotheses. Building on Chinn and Prasad (2003) and Gruber and Kamin (2007), we assess econometrically whether different measures of financial development explain the net flow of capital from developing to industrial economies, as well as the concentration of those flows toward the United States. We also assess whether differences in asset returns, an alternative measure of the attractiveness of financial assets, can explain the international pattern of capital flows.

We find little evidence that differences in financial development help to explain the global pattern of current account imbalances. The measures of financial development generally do not explain either the net flow of capital from developing to industrial economies or, more specifically, the large U.S. current account deficits. Lower bond yields have been generally associated with lower current account balances (e.g., larger deficits) in industrial countries. However, U.S. bond yields have not been significantly lower than in other industrial economies, nor have expected equity earnings yields. This suggests, contrary to conventional wisdom, that U.S. financial assets have not been demonstrably more attractive than those of other industrial economies, and hence cannot explain the large U.S. deficit.

Finally, we consider the alternative but related hypothesis that spending in the United States was uniquely responsive to the lower cost of credit stemming from capital inflows from developing countries, thus accounting for the outsized U.S. deficit. However, we found this hypothesis also to be weak, as household saving rates have declined throughout the industrial economies, not just in the United States.

Keywords: Capital flows, bond yields, current account

JEL classification: F21, F32

1 Introduction

There is, as yet, no consensus as to the factors underlying the emergence of large current account surpluses and deficits around the world. However, many observers have come to focus on differences in financial development to explain these imbalances.

One strain of thinking focuses on why net capital is flowing from developing to industrial economies, the opposite of what conventional theory would predict. It is suggested that developing countries have inefficient financial systems that encourage saving and discourage investment (Hubbard, 2006; Prasad, Rajan, and Subramanian, 2006; Ju and Wei, 2006). Another hypothesis is that developing countries seek the high-quality financial assets that industrial economies produce, and they are willing to run current account surpluses in order to acquire those assets (Caballero, Farhi, and Gourinchas, 2006; Mendoza, Quadrini, and Rios-Rull, 2007). Differences in financial development have been cited not only to explain why capital is flowing on net from developing to industrial economies--what Bernanke (2005, 2007) referred to as the "global saving glut"--but also why the United States has attracted the lion's share of those flows. The prevalent view is that the prominent depth, breadth, and safety of U.S. financial markets, combined with a highly entrepreneurial culture and a supportive legal system, explains why the United States has attracted so much of the world's savings (Blanchard, Giavazzi, and Sa, 2005; Clarida, 2005; Cooper, 2005; Hubbard, 2005).

These hypotheses are plausible and are receiving increasing acceptance among observers and researchers. Yet, they have not been submitted to much rigorous empirical testing. The focus of this paper is on assessing whether financial-development explanations of the pattern of global current account imbalances are genuinely consistent with the data.

Our research starts by examining the sources of net capital flows from developing to industrial economies (what some have referred to as the "uphill flow of capital"). Building on Chinn and Prasad (2003) and Gruber and Kamin (2007), we start with a panel regression model that, for a wide range of developing and industrial economies over several decades, relates current account deficits (as a share of GDP) to a selection of standard determinants such as output growth, fiscal balances, per capita income, and demographic variables. Those variables, by themselves, cannot explain the uphill flow of capital. We then add to the model different measures of financial development--e.g., private credit and stock market capitalization--and determine whether these measures help to explain why so many developing economies have been running substantial current account surpluses. Our analysis is similar in scope and methodology to recent research by Chinn and Ito (2007a, 2007b); Chinn and Ito focus on the interaction between financial development, legal institutions, and financial openness in influencing current accounts, while our work focuses on the broader relationship between financial development and the international pattern of current account imbalances.

Whether or not differences in financial development explain why developing countries are running current account surpluses, they may still explain why the funds generated by those surpluses are being channeled primarily to the United States. The second part of our research addresses this hypothesis. We re-estimate the panel regressions described above, but restrict the sample to industrial economies alone in order to determine whether those industrial economies with the most developed financial systems are the ones most likely to attract net capital inflows.

As a complement to this research, we also consider the configuration of interest rates among industrial economies. In principle, the most financially developed economies--those with the deepest, most liquid, and most mature financial markets--should enjoy lower risk premia on their assets than those issued in less developed financial markets, and thus their interest rates should be lower. These lower interest rates, in turn, should boost investment and discourage saving, thereby lowering the current account balance. Accordingly, we test to see whether industrial economies with relatively large current account deficits, such as the United States, have enjoyed relatively low interest rates in recent years, and whether the pattern of interest rates can help explain the pattern of current account imbalances. (See Balakrishnan and Tulin, 2006, for a related analysis of this issue.) We also examine expected returns on equities.

To provide a plan of the paper and foreshadow our key results, in Section II we provide evidence that measures of financial development, such as the amount of private credit or scale of stock markets, do not help to explain the uphill flow of capital from developing to developed economies. In our panel regressions for a global sample of countries, the coefficients on these measures generally are neither significant nor of the expected sign. Accordingly, in explaining the recent current account deficits of developing countries, we fall back on the factors identified by Bernanke (2005, 2007) and Gruber and Kamin (2007) as causing the global saving glut: Asian financial crises and the price-driven surge in the revenues of oil exporters.

Section III addresses the question of why the United States absorbed the lion's share of capital coming from developing countries. We find no evidence that the pattern of current account imbalances within industrial economies reflects the pattern of financial development, either. In a panel regression restricted to industrial economies, the coefficients on financial development measures for the most part are insignificant and have the wrong sign. Moreover, even after inclusion of financial development measures, these equations fail to explain the large U.S. current account deficit.

Section IV describes how, when we use interest rate differentials rather than more direct "quantity" measures of financial development, these differentials do indeed help to explain the pattern of current account balances among industrial economies: Countries with higher-than-average real interest rates, whose assets implicitly are less desirable to global investors, tend to run higher current account balances (smaller deficits).

Even so, these differentials do not help to explain the large U.S. deficit. This is because U.S. real long-term interest rates have neither been substantially lower than, nor have fallen further than, those of most other industrial economies in recent years. In fact, econometric equations relating long-term interest rates to standard determinants such as inflation and GDP growth are able to explain the decline in U.S. interest rates since the late 1990s reasonably well, even as they fail to capture declines in interest rates in several other industrial economies. This is an important and surprising finding, as it contradicts the conventional wisdom that U.S. assets are demonstrably superior to assets of other industrial nations in the eyes of global investors, and that U.S. interest rates have been pushed down especially far by capital inflows from developing countries. This finding is corroborated by an analysis of expected earnings yields on equities, which shows, again, that such yields have not fallen further in the United States than in other industrial countries.

If the exceptional attractiveness of U.S. financial markets does not explain why the United States took greatest advantage of the global saving glut to finance larger deficits, what does? In Section V, we consider an alternative but related explanation: Spending in the United States is more responsive to the cost and availability of credit than in other industrial countries, and this has led to an outsized increase in U.S. spending, borrowing, and the current account deficit.

A key feature of this explanation is that, rather than positing exogenous shocks to spending in the United States and abroad, it assumes this spending has responded in a consistent manner to its fundamental determinants. Indeed, we confirm that household saving in the United States and several other industrial economies has been well explained in recent years by its fundamental determinants, including two variables likely to reflect the influence of the global saving glut: interest rates and household wealth. However, we also document that household saving rates declined in many industrial economies during the past decade, so that the U.S. experience was not unique in this regard. Rather, what is unique about the United States is that increases in household spending were not offset by increases in public or corporate saving, as they were in most other industrial economies. Insofar as the global saving glut should have led to increased spending in general, we suggest that the experience of other industrial economies is curious and bears further examination.

2 Do Differences in Financial Development Explain Capital's Uphill Flow?

In this section we attempt to gauge the importance of financial market development in determining the recent pattern of current account balances, particularly in regard to the uphill flow of capital from developing economies to developed economies, via panel regressions in the style of Chinn and Prasad (2003) and Gruber and Kamin (2007). These regressions relate the ratio of the current account balance to GDP (defined so that a rise in the balance means a larger

surplus) to various indicators of financial development, controlling for a number of other possible current account determinants.

The sample for the regressions covers up to 84 countries over the period from 1982 to 2006. As in previous work, we consider multi-year averages of annual observations in order to abstract from dynamics resulting from frictions and adjustment processes related to the business cycle. Data were averaged over the 1982 - 1986, 1987 - 1991, 1992 - 1996, 1997 - 2001, and 2002 - 2006 periods. Some series entered into the regression with a lagged observation calculated over the 1977 - 1981 period. In cases of missing annual data, period averages were calculated based on years for which observations were available.

In order to correctly estimate the impact of financial market development on current account balances, we control for a number of other possible determinants of current accounts: the level of per capita income, changes in real GDP growth rates, fiscal balances, the lagged level of net foreign assets, the dependency ratio, the degree of openness, the nominal oil balance, and, in some instances, the quality of government institutions. These variables are standard in the literature, and are motivated and constructed along the lines of Gruber and Kamin (2007). (See the appendix for sources.) Most variables are entered as deviations from a GDP-weighted sample mean, as current accounts are relative and should only be affected by the idiosyncratic country-specific element of the variables. Our regressions also include period fixed effects, allowing the average current account balance to GDP ratio to vary across time.

The measures of financial development that we consider are taken from the 2006 update of Beck, Demirgüç-Kunt, and Levine (2000). Financial development may be measured by any number of criteria including the quality of supervision and regulation, the safety and soundness of institutions, legal protections for market participants, the breadth and depth of markets, and the scale of the financial sector relative to the overall economy. Beck, Demirgüç-Kunt, and Levine provide consistent data for a wide range of countries, and although these data do not address all of the criteria listed above, they most likely are reasonable proxies for the overall level of financial development. We report results controlling for a variety of measures of financial development, including private credit/GDP, bank assets/GDP, non-bank financial assets/GDP, stock market capitalization/GDP, stock market turnover/GDP, and the growth of stock market capitalization/GDP. As with our other control variables, all the financial development variables were entered into the regressions as deviations from the GDP-weighted sample mean, as it is the relative superiority of financial institutions which should attract capital flows rather than the absolute level of development.

Table 1 reports summary statistics for the measures of financial development that we consider. Column 1 reports the simple average of the measures across the last period of the sample. The next two columns report averages for two different sub-samples, those countries that had current account surpluses in excess of 2 percent of GDP on average over the period between 2002 and 2006 and those countries that had current account deficits in excess of 2 percent of GDP over the same period. Comparing the two columns provides weak evidence that greater financial development is actually associated with larger current account surpluses, contrary to the common conjecture. Period averages for the United States, Column 4, are far above the total sample average, indicative of the United States' highly developed markets. For the most part, the U.S. averages also exceed those of other industrial countries, while developing

Asia has fairly advanced financial indicators compared with the total sample averages shown in the first column.

Before considering the impact of financial development on current account balances, Table 2 assesses the predictive impact of the non-financial determinants. The regressions include an unreported constant and fixed period effects. For each explanatory variable, the first row reports the coefficient estimate and the second row is the associated t-statistic; coefficients that are statistically significantly different from zero at the 90 percent level or higher are indicated in bold.

Column 1 reports the coefficient estimates for the simplest non-financial model. Governance indicators are only available for the last three period averages, and are thus excluded from this preliminary regression in order to allow the largest number of observations. The regression produces plausible results, with all variables excluding GDP growth entering significantly and with the anticipated sign. That is, higher current accounts balances (larger surpluses or smaller deficits) are associated with higher per capita incomes, higher fiscal balances, more net foreign assets (which raise net investment income), fewer young or aged dependents, higher net oil exports, and greater economic openness.

The regression reported in Column 2 includes separate dummy variables for the United States and for the major developing Asian countries in the sample for both the 1997 - 2001 and 2002 - 2006 periods. We focus on the developing Asian economies because, alongside the oil exporters, they represent the main source of developing country current account surpluses. The coefficients on the dummy variables represent the average difference between the actual current account and the model prediction across the two period averages. As shown in

Column 2, the model without indicators of financial market development does quite poorly at predicting the U.S. deficit and the developing Asian surpluses, with the U.S. prediction error large, negative, and significant, and the error for the developing Asian countries large, positive, and significant.

Column 3 adds a measure of the quality of government institutions to the regression, with a higher value for the indicator indicating superior institutions. Institutions enter significantly into the regression and, consistent with expectations, have a negative coefficient, indicating that better institutions are associated with a more negative current account balance. However, as shown in Column 4, the addition of the government institutions variable does not explain the U.S. current account deficit, as the coefficient on the dummy variable remains large, negative, and significant. Institutions also leave the surpluses of developing Asia unexplained.

Given the inability of standard current account determinants to explain the large Asian surpluses or U.S. deficit, we now examine whether different measures of financial development can improve the model's performance. Table 3 reports estimation results from regression equations that include the measures of financial development discussed earlier. (The sample changes across the regressions on account of differences in data coverage across the financial variables.) The non-financial variables generally retain coefficient estimates in the same range as those reported in the non-financial regressions in Table 2. However, with the exception of the growth of stock market capitalization, the coefficients on the financial variables are positive, indicating that greater financial market development is associated with a greater current account surplus, contrary to theories that associate greater development with larger deficits. Of the

variables considered, only the growth of stock market capitalization has the correct sign and is significant. Table 4 repeats the regressions from Table 3, adding the government institutions variable (which further reduces the sample size). Again, the financial variables generally enter with the wrong sign and are insignificant, with the exception of the growth of stock market capitalization.¹

Table 5 examines whether the growth in stock market capitalization, the only financial market variable to come in significantly and with the right sign in earlier regressions, can explain both the Asian surpluses and the U.S. deficit. As shown in Column 1, the dummy variable for the developing Asian economies as well the dummy for the United States remain significant, such that the Asian surpluses and the U.S. deficit remain unexplained. Column 2, shows that the U.S. deficit remains inexplicably large when the Asian dummy is excluded from the regression. Columns 3 and 4 repeat the regressions from Columns 1 and 2 including governance indicators and over a shorter sample, and display a similar outcome.

Our results suggest that, contrary to what is emerging as conventional wisdom, measures of financial development are not an important determinant of the international pattern of current account balances: they can explain neither the large developing Asian surpluses nor the large U.S. deficit. A brief look at the data shows that this result should not be all that surprising, as the developing Asian economies have both a relatively high level of financial development as well as large current account surpluses. As shown in Figure 1, the economies of developing Asia have some of the highest private credit/GDP ratios in our sample. The developing Asian economies are also above the norm in terms of bank deposits/GDP, non-bank financial assets/GDP, stock market capitalization/GDP, and stock market turnover/GDP, as shown in the last column of Table 1.²

3 Do Differences In Financial Development Explain the Large U.S. Deficit?

As discussed above, differences in financial development do not seem to be able to explain the uphill flow of capital from developing to developed countries. However, the high level of financial development in the United States relative to its industrial peers, as evidenced by Columns 4 and 5 on Table 1, might still be able to explain why capital flowing out of the developing world seems to have wound up mainly in the United States.

In Table 6 we present panel regressions similar in structure to those reported earlier, but with the sample constrained to include only 21 industrial countries. We restrict the sample to industrial economies in order to determine whether differences in financial development strictly between industrial countries themselves help explain who received the most capital inflows. None of the financial market indicators are significant in our industrial country sub-sample. However, unlike with the larger sample, the coefficients on the private credit/GDP and non-bank financial assets/GDP both have the right (negative) sign, as does the coefficient on the growth of stock market capitalization. Even so, inclusion of the two marginally significant variables, private credit/GDP and the growthof stock market capitalization, does not help the model explain the large U.S. deficit, which retains its significant negative dummy. ³

Because of the prominence of the view that the exceptional nature of the U.S. financial system accounts for the country's large deficits, Table 7 reports results for still more measures of financial development that were not reported for the larger sample: financial system deposits/GDP, bank overhead costs/total assets, the net interest margin, a measure of bank concentration, and private bond market capitalization/GDP. As with the earlier data, these data were taken from the 2006 update of Beck, Demirgüç-Kunt, and Levine (2000). As shown in Column 1, the coefficient on financial system deposits/GDP is significant but of the wrong sign. In Column 5, the coefficient on private bond market capitalization/GDP is significant and of the right sign. However, as shown in Column 6, including private bond market capitalization/GDP in the regression does little to help explain the large U.S. deficit.

4 Are U.S. Assets Special? Evidence from Asset Prices

In Section III, we tested a battery of different measures of financial development and found that few of them helped to explain the pattern of current account balances among industrial economies. The few variables whose coefficients were both significant and of the expected sign--private credit/GDP, private bond market capitalization/GDP, and the growth in stock market capitalization--still did not help to explain the large U.S. current account deficit in recent years.

In this section, we switch from "quantity" measures of financial development--e.g., private credit or stock market turnover--to measures based on asset prices. In principle, the global integration of financial markets should lead expected asset returns around the world to be equalized. To the extent that differences in expected asset returns remain, these differences likely reflect differences in asset preferences and/or required risk premia (Orr, Edey, and Kennedy, 1995, Balakrishnan and Tulin, 2006). Hence, if, as many argue, the U.S. financial system is regarded by investors as deep, liquid, and especially safe, one would expect investors to accept lower rates of return on U.S. assets than on the assets of countries with less effective financial systems. Accordingly, differentials in asset returns may reflect investor appraisals of the attractiveness of different financial systems more accurately than the more ad hoc "quantity" measures analyzed in Section III, and hence have a better chance of explaining the pattern of current account balances.

4.1 Do interest-rate differentials explain current account balances?

We begin with the most widely available measure of asset returns, the yield on long-term government bonds. To abstract from differences in expected inflation (and hence exchange rate depreciation) across countries, we focus on real interest rates, which we compute by subtracting the contemporaneous four-quarter inflation rate from the nominal yield.⁴ Interest rate differentials are then computed by subtracting from each country's real interest rate the GDP-weighted average of real interest rates in the industrial countries.

Table 8 displays the estimates of our panel regression model for industrial countries, once the interest rate differential is included. The coefficient on that variable is significant and positive, as expected: Higher-than-average interest rates in a country indicate that investors find that country's assets less attractive, and hence are associated with smaller net capital inflows and larger current account balances.⁵ Even so, the coefficient on the dummy variable for the U.S. current account in 1997-2006 remains negative, significant, and large. Thus, inclusion of the interest rate differential does not help to explain the large U.S. deficit.

4.2 Trends in long-term interest rates

If industrial countries with relatively lower long-term bond yields tend to experience relatively larger current account deficits, why don't the equations shown in Table 8 explain the large U.S. deficits of recent years? Figures 2 and 3 provide a ready answer to that question: in recent years, U.S. long-term interest rates neither have averaged significantly below those of other industrial countries, nor have they declined by a significantly larger extent. Thus, if investors find U.S. assets particularly attractive, this attractiveness is not apparent in bond prices.⁶

Figure 2 presents nominal interest rates on long-term (usually 10-year maturities) government bonds, comparing those for a range of industrial countries with the GDP-weighted average of OECD countries (excluding Korea and Mexico). Most countries' long-term treasury yields lie above the OECD average, which is depressed by Japan, whose very low nominal interest rates are weighted highly. Even taking that into account, however, there is no evidence that U.S. long-term yields have been substantially lower--relative to the OECD average--than those of most other countries (excluding Japan) in the period since 1996. U.S. nominal yields have indeed been somewhat lower than those in Australia, U.K., and Norway, but they have much closer to those in Canada, Germany, Spain, France, Italy, and Belgium.

Furthermore, there is no evidence that nominal long-term interest rates in the United States fell by more than those of other countries from the pre-1997 period--before the global saving glut--to afterward: nominal U.S. and OECD-wide yields have tracked each other closely for decades. Several other countries--U.K., Australia, Spain, and Italy--exhibited a much steeper decline in their interest rates since 1996.

Figure 3 repeats the analysis with real long-term interest rates. These charts confirm that U.S. real interest rates remained very close to those of the OECD average during the past 10 years or so. (The divergence between Japanese and other interest rates was smaller in real terms than in nominal terms over the period, and hence Japan depresses the OECD average by much less.) The charts also confirm that, as with nominal interest rates, real interest rates did not decline any more quickly in the United States than they did in the other industrial economies on average.

Our findings are consistent with those of Balakrishnan, Bayoumi, and Tulin (2007), who found little evidence that bond yields in the United States had fallen more than in the euro area or the United Kingdom in recent years.⁷ $^{ }$ Balakrishnan and Tulin (2006) do find evidence of negative risk premia for U.S. assets, showing that nominal interest rate differentials between the United States and other countries were insufficient to compensate for expected exchange rate depreciation as derived from surveys. However, their study uses short-term interest rates rather than the longer-term yields most likely to reflect investor preferences, and it remains unclear whether survey measures of exchange rate expectations correlate well with the expectations held by actual traders.

To summarize, the fact that U.S. real long-term interest rates were similar to those of other industrial economies in the past decade represents prima facie evidence that U.S. assets did not command an unusually low risk premium among global investors. And the fact that real interest rates did not decline more in the United States than elsewhere tends to undercut the view that the expansion of investor portfolios in the past decade (associated with the global saving glut) was targeted primarily toward U.S. assets.⁸

4.3 Comparison of interest-rate trends with model predictions

As noted above, the fact that U.S. yields have behaved very similarly to those in other countries in the past decade contradicts the view that investors considered U.S. assets to be especially attractive, and this led them to channel the additional funds associated with the global saving glut mainly toward U.S. assets. It is possible, however, that the United States may have experienced other shocks that, in the absence of a special attractiveness of its assets to foreign investors, would have boosted U.S. interest rates relative to those in other industrial economies. For example, a decline in household saving or rise in the fiscal deficit would have put upward pressure on interest rates--the fact that they did not rise relative to other countries could be taken as evidence that investors were especially attracted to U.S. assets. Additionally, as suggested in footnote 8 above, even in the absence of exogenous shocks, it is possible that low interest rates induced by the special attractiveness of U.S. assets could have led U.S. spending and output growth to increase endogenously, and that might have pushed U.S. interest rates at least partway back toward parity with other countries.

To address these possibilities, we estimated some simple econometric models of long-term yields for the United States and other industrial economies. These models are estimated separately for each country rather than in the panel data format used in the regressions described above. They incorporate standard determinants of interest rates, such as real GDP growth, inflation, and the fiscal balance, along the lines followed by Warnock and Warnock (2006). We would expect these models to capture the effects of standard shocks to interest rates such as a rise in household consumption, business investment, or the fiscal deficit. However, such models would not be expected to capture a shift in portfolio demands for long-term bonds. Accordingly, if U.S. assets were considered particularly attractive to global investors, and if the bulk of the global saving glut was being channeled to U.S. markets as a result of that attractiveness, we would expect U.S. interest rates to fall by more than predicted by our models during the period after 1996. By the same token, we would expect interest rates in other countries to adhere more closely to model predictions.

Models without expectational variables Table 9 presents estimation results of our first model, OLS regressions of quarterly values of nominal long-term sovereign yields on contemporaneous values of the nominal money market interest rate, the 4-quarter CPI inflation rate, the 4-quarter growth rate of real GDP, the standard deviation of the quarterly change in the long-term nominal interest rate over the preceding 12 quarters, the structural (full-employment) fiscal balance as a ratio to GDP, and two lags of the dependent variable. For most of the countries studied, the starting point for the estimation is in the 1970s or 1980s; a similar model, discussed below, includes survey measures of expectations, but owing to data availability, these regressions do not start until the 1990s. For the United States, the coefficients all have the expected sign and, for the most part, are significantly different from zero; for other countries, the results are more mixed but generally consistent with conventional expectations.

Figure 4 uses the estimated equations to present two different measures of the extent to which actual interest rate behavior may have differed from the models' predictions over the past decade. For each country, the figure on the left compares the actual movement in interest rates with a dynamic simulation of the model from 1998 onwards (with, for this exercise, the model being estimated only through 1997). The figure on the right represents a test of structural stability, the "cusum" estimate of the cumulative sum of the model one-step-ahead residuals, along with the 95 percent confidence interval for this calculation.

The results for the United States suggest, at most, weak evidence that interest rates in the United States fell more than model predictions since 1997. The interest rate fell more than the dynamic simulation on the left, but until the end of the sample, remained within the 95 percent confidence interval. The cusum test indicates that residuals tended to be negative since the mid-1990s, again suggesting interest rates fell more than model predictions, but not to a statistically significant extent.

More importantly, the results for other countries suggest that their interest rates also tended to fall somewhat more in the past decade than model predictions, and to an even greater extent than in the United States. In a number of countries, the interest rate fell below the confidence interval for the dynamic simulation, and in two countries, the cusum calculation dropped below the 95 percent confidence bounds. In no countries did interest rates rise above model predictions by a significant margin.

These results indicate that the behavior of U.S. long-term yields during the past decade was in no way different from that of yields in other industrial economies. To the extent that U.S. yields fell somewhat more than predictions of a standard model, this was an experience shared by many other countries. Accordingly, it is possible that all industrial countries benefited equally, in terms of their bond yields, from the global saving glut. Other explanations for the universal decline in bond yields are beyond the bounds of this paper, but could involve, among other things, reductions in inflation expectations and improvements in central bank practice and communications.

Models with expectational variables Table 10 presents results of a model that uses survey expectations of inflation and real GDP growth from Consensus Economics. The specification of the equation is quite similar to that in Warnock and Warnock's (2006) analysis of the effects of capital inflows on U.S. interest rates. The explanatory variables include 10-year inflation expectations, the spread between 1-year and 10-year inflation expectations, the money market interest rate, the standard deviation of long-term yields over the preceding 12 quarters, expectations of real GDP growth over the next year, the structural fiscal balance/GDP ratio, and two lags of long-term interest rates. As the time series for Consensus Economics forecasts are much shorter than for non-expectational data, the estimation periods are much shorter as well, and results are available for only a limited number of countries.

For the most part, the signs of the coefficients on the explanatory variables are of the expected sign, although that on the fiscal balance is more mixed and coefficients are not always significant. Figure 5 presents several tests of model prediction. Because the estimation samples start in 1990 at the earliest, it did not seem sensible to show dynamic out-of-sample predictions. Instead, the left hand panel for each country compares the actual and fitted values of the interest rates--these move together very closely owing to the lagged dependent variables, but the residuals plotted at the bottom of the charts may be more informative. The right hand panel for each country displays the cusum test for the model, as shown (above) for the models without expectational variables.

Looking first at the United States, it is hard to discern much of a change in the pattern of residuals between the early and later parts of the sample. The cusum test indicates a pattern of negative residuals--indicating actual interest rates lower than model prediction--but well within the confidence bounds. Conversely, for several other countries--U.K., Netherlands, Sweden--the cusum test indicates a more significant decline in interest rates relative to model prediction.

In sum, as with the models without expectational variables, the models with expectational variables provide no evidence in support of the view that the global saving glut depressed interest rates in the United States by a greater extent than in other industrial economies.

4.4 Other rates of return

Thus far, we have focused on sovereign (that is, government) bond yields as measures of the rates of return assessed by global investors. This is a sensible strategy, as sovereign bonds are issued by many countries--they often are widely traded in deep markets, and their yields are easy to compare with each other. Nevertheless, the U.S. current account has been financed by foreign purchases of corporate bonds and equities as well as government bonds. Accordingly, it is possible that the U.S. assets which have proven especially attractive to global investors have been corporate bonds or stocks rather than government bonds.

Is there any evidence that the comparative advantage of the United States is in the issuance of private rather than public assets? Such evidence would entail yields on U.S. corporate bonds or stocks either being lower than those on comparable assets in other industrial economies or falling more steeply since the mid-1990s. Figure 6 presents yields on corporate AA and BBB rated bonds, respectively, for the relatively few countries and years for which these data are available. Comparing U.S. corporate bond yields with those of the United Kingdom, Canada, Japan, and the EU countries in aggregate, there is no evidence that U.S. corporate yields either are lower than those in other countries or have fallen more rapidly in recent years.

We now turn towards the return on equities. Figure 7 compares the forward earnings yield on equities in a selection of industrial economies to the GDP-weighted mean for OECD countries for which these data are available. This yield is calculated as the expected year-ahead earnings per share, as surveyed by I/B/E/S, divided by the share price. It thus represents the expected rate of return (abstracting from capital gains) on stocks, and is comparable to the yield on sovereign or corporate bonds. The U.S. earnings yield moves from tracking above the OECD average (the red dashed line) for most of the period prior to 2000 to falling below the OECD average thereafter. In principle, this could suggest that with the advent of the global saving glut, investors attracted to U.S. stocks could have pushed the U.S. earnings yield down further than that of other industrial economies.

However, many other industrial economies also exhibit declines in their earnings yields relative to the OECD average. This is explained by the fact that Japanese earnings yields started the late 1980s at a very low level and have trended up since. Given Japan's sizeable GDP weight, its low earnings yield pulled down the OECD average early on and boosted it later in the sample; this led the earnings yields of many other industrial economies to start out higher than the OECD average and decline toward it more recently. The blue dotted line indicates the OECD average excluding Japan. The U.S. earnings yield has moved closely with this average through 2000 and fallen just a bit below it thereafter. Accordingly, it does not appear that global investors found U.S. stocks to be significantly more attractive than the equities of other industrial economies.

5 A Related Hypothesis

To sum up the results described in Sections III and IV, we have found little evidence for the view that global investors have found U.S. assets to be especially attractive, and that this attractiveness is what explains the large U.S. current account deficit. Thus, the question of what explains the deficit remains open.

In this section, we consider an alternative but related hypothesis, which for convenience we will label the "spending response" hypothesis: Although U.S. rates of return were not pushed down further than rates in other countries by the global saving glut, U.S. consumption and investment spending is more sensitive to such rates. Accordingly, U.S. domestic demand expanded more sharply than demand in other industrial countries in response to the increased supply of saving from developing countries, and this explains the more pronounced widening of its current account deficit.

Although we have not seen a formal elaboration of the "spending response" hypothesis in the literature, variants of it arise frequently in general discussions of the U.S. deficit, and it is consistent with widespread views that the U.S. financial system is more innovative and aggressive in channeling resources toward users of capital than financial systems in most other industrial economies. To note one particularly topical example, some argue that the decline in interest rates earlier in this decade contributed to the sub-prime mortgage boom in the United States, which, in turn, boosted residential housing investment. An implication of this proposition is that the global saving glut spurred financial innovation, spending, and a widening of the current account deficit in the United States, and to a greater extent than in most other industrial economies.

To evaluate the spending response hypothesis, we began by focusing on the largest component of spending in most economies, household consumption. Table 11 presents estimation results for equations relating the quarterly log-change in real household consumption to several standard explanatory variables (in addition to an unreported constant): the log-ratio of consumption to household disposable income, the ratio of household wealth to household disposable income, the real money market interest rate, and the log-change in real household disposable income. The consumption functions are estimated only for the G7 economies, as OECD data on household wealth are limited to those economies.

The coefficient estimates for the United States are of the expected sign and most are significant: real household consumption growth reacts negatively to the ratio of consumption to disposable income (essentially an error-correction term), positively to the ratio of household wealth to disposable income, negatively to the real money market interest rate, and positively to the growth of real disposable income. The estimates for the United Kingdom, Canada, and Germany also are consistent with expectations. Conversely, the estimates for France, Italy, and Japan indicate aberrant responses of consumption to household wealth or interest rates.

To the extent that the global saving glut boosted consumption, it would have done so most directly by affecting the money market interest rate and household wealth (which includes assets such as equities and bonds). The estimation results in Table 11 present some weak evidence that the responsiveness of consumption to interest rates and wealth is somewhat higher in the United States than in most of the other G7 countries, and similar to that in Canada.

Figure 8 presents dynamic out-of-sample simulations of these equations, starting in 1998. For those countries whose coefficient estimates are sensible--U.S., U.K., Canada, and Germany--the models do a reasonably good job of tracking the path of consumption. This is an important finding, as it contradicts the widely held view that the expansion of the U.S. current account deficit reflects an exogenous decline in U.S. household saving. In fact, U.S. consumption (and hence saving) appears well explained by its fundamental determinants, and thus seems to have been influenced more by movements in interest rates and wealth than by any exogenous shocks.

Given the results shown so far, if U.S. household saving rates had declined substantially more than saving rates in other industrial countries, this would provide support for the hypothesis that spending in the United States was more responsive than in other countries to the global saving glut, thus helping to explain the large U.S. deficit. However, as illustrated by Figure 9, this is not the case. Figure 9 decomposes the changes in the current account/GDP ratio between 1996 and 2005 for many industrial economies into their respective changes in the components of saving and investment rates.⁹ In the United States, consistent with conventional wisdom, the expansion of the current account deficit can be decomposed primarily into a reduction in household saving and an expansion of residential investment. However, these developments are by no means unique to the United States. Most of the industrial economies in the figure also experienced substantial declines in household saving rates, and several of them also experienced substantial increases in residential investment. (See de Serres and Pelgrin, 2003, for a broad analysis of the decline in private saving rates in industrial economies.) These shared trends should not be surprising, considering that real interest rates declined and household wealth ratios rose throughout the industrial economies during the past decade.

Why, then, did the U.S. deficit expand more than that of most other economies during the past decade? This question cannot be answered definitively from the decomposition shown in Figure 9. This decomposition merely breaks down the change in current accounts into

corresponding changes in saving and investment rates, which themselves are endogenous with respect to more fundamental factors.

Nonetheless, the pattern of changes in saving and investment components may offer some clues. Perhaps most obviously, although the most important changes leading to larger current account deficits in the United States--the decline in household saving and increase in residential spending--were not very large, there were few offsetting movements in other U.S. saving or investment components. By contrast, in Canada and Japan, large declines in household saving were offset by large increases in corporate saving. Moreover, about half of the countries shown in Figure 9 exhibited substantial increases in public saving--which also offset declines in household saving in many cases--whereas U.S. public saving marked a small decline.

It is difficult to understand why public and corporate saving increased in so many countries since the mid-1990s, thereby offsetting increases in household spending.¹⁰ To provide more perspective, Figures 10 and 11 present analogous decompositions of the level of the current account balance, as contrasted with the decompositions of the change in the current account shown in Figure 9. Figure 10 indicates that in 1996, a large number of industrial economies already had corporate saving rates well in excess of the U.S. rate; by 2005, as shown in Figure 11, this gap grew still wider. Additionally, Figures 10 and 11 document how public saving rates in a number of foreign industrial economies swung from negative to positive, and often substantially so. Finally, U.S. household saving was already exceptionally low compared with

most other countries in 1996; it generally retained that status as saving rates in the United States and elsewhere generally declined over the subsequent decade.

Putting these pieces together, we would argue that in response to the glut of saving coming from developing countries, it would have been natural for most industrial economies to have increased spending, borrowing, and current account deficits. That such developments did not materialize in many industrial economies--as declines in household saving and increases in residential investment were offset by greater public and corporate saving--may be more anomalous than the widening of the current account deficit experienced in the United States. The reasons for these offsets lie beyond the scope of this paper but clearly merit further research.

6 Conclusion

In this paper, we evaluated the popular hypothesis that the pattern of current account imbalances around the world can be explained by differences in the extent of financial development. Broadly speaking, this hypothesis holds that countries with more advanced financial systems, and which produce safer and more liquid assets, will be more likely to attract capital from abroad and hence run current account deficits. Accordingly, because industrial economies have more advanced financial systems than developing countries, developing countries have been running current account surpluses vis-à-vis the industrial economies. And within the industrial economies, the United States, with its exceptionally deep, liquid, and well-regulated financial markets, has been garnering of lion's share of these capital inflows.

To test these hypotheses, we estimated panel regressions that related the current account balance as a share of GDP to a set of standard explanatory variables such as per capita income, GDP growth, fiscal policy, and demographic variables. We then explored whether, by adding different measures of financial development (private credit, bank and non-bank assets, stock market capitalization, and stock market turnover) to our panel regressions, we could explain the two salient aspects of global capital flows: the large current account surpluses of the developing economies, and the outsized deficits being run by the United States. In fact, the coefficients on the financial development variables were generally of the wrong sign, and models including those variables failed to predict either the large developing country surpluses or the large U.S. deficit. Hence, these results provide little support for the view that differences in financial development account for the international pattern of external imbalances.

To drill down deeper into this issue, we addressed an alternative indicator of financial development: differences in asset returns. In principle, economies that produce more desirable financial assets should have to pay lower premia on those assets, and hence would enjoy lower financing costs than economies producing less attractive assets. When we added measures of government bond yields to our panel regressions, we confirmed that countries with lower bond yields tend to have lower current account balances (i.e., larger deficits). Even so, the models do not explain the large U.S. deficits. The reason for this is that U.S. government bond yields have neither been lower than, nor fallen farther than, the returns of other industrial economies in the past decade; the same is true of U.S. corporate bond yields and forward equity earnings. This finding surprised us, as it contradicts the conventional wisdom that U.S. financial assets are exceptionally attractive, even compared with those of other industrial nations.

If differences in financial development do not explain the global pattern of current account imbalances, then what does? In regards to the surpluses of developing countries, we are inclined to emphasize the factors highlighted by Bernanke (2005, 2007) and Gruber and Kamin (2007) as contributing to the "global saving glut": Asian financial crises and windfall revenues for oil exporters.

In regards to the outsized U.S. deficits, our initial hypothesis was that U.S. domestic spending is more responsive to interest rates and asset prices than spending in other industrial economies, and hence rose more in reaction to the lower cost of credit associated with the global saving glut. Estimation of consumption functions confirmed that the decline in U.S. household saving rates did not represent an exogenous shock, but rather was well-explained by movements in interest rates and household wealth. However, we found that the household saving rates declined in many other industrial economies as well, and that some of these economies also experienced a boom in residential investment similar to that in the United States.

Therefore, the apparent positive reaction of household spending to the global saving glut was not confined to the United States, but rather was shared by many industrial countries. What distinguishes the United States from most other industrial economies was that the rise in U.S. household spending was not offset by declines in the spending of other sectors, so that the current account deficit widened substantially. In contrast, in most other industrial economies, reduced household saving was offset by increased public and/or corporate saving, thus restraining the widening of current account imbalances in the face of the global saving glut. These developments suggest that the most salient question for future research may not be "why did the U.S. deficit widen so much?" but rather "why did the deficits of other industrial economies widen so little?"

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Data Appendix

Series	Source
Current Account, Nominal GDP, Per Capita Income, Imports, Exports, Age Dependency Ratio	World Development Indicators
Financial Development Variables	Thorsten Beck, Asli Demirgüç-Kunt, and Ross Levine (2000 and revised 2006)
Fiscal Balance	GFS, OECD, Asian Development Bank, MOF(Taiwan)
Net Foreign Asset Position	Lane and Milesi-Ferretti (2006)
Indicators of Institutional Quality	Kaufmann, Kraay, and Mastruzzi (2005)
Oil: Imports, Exports, and Prices	Energy Information Agency - Department of Energy
Money Market Interest Rate, Real GDP,	IFS
AA and BBB Corporate Spreads	JP Morgan
Forward Equity Earnings Yields	Institutional Brokers Estimate System (I/B/E/S)
Inflation Expectations, GDP Growth Expectations	Consensus Economics
Investment components of national income accounts	BEA (US), OECD (all other countries)
Saving components of national income accounts	BEA (US), Eurostat (euro area, Denmark, Sweden, UK), OECD (Canada), Australian Bureau of Statistics (Australia), Cabinet Office (Japan)
CPI Inflation, Real Consumption, Real Disposable Income, Household Wealth, Long-term Interest Rates	OECD

Additional details on the construction of saving ratios shown on Figures 9 through 11:

For the United States the data is from NIPA Table 5.1 Saving and Investment. Gross Personal Saving is calculated as Net Personal Saving (Line 4) plus Consumption of Fixed Capital by Households and Institutions (Line 16). Gross Corporate Saving is calculated as Undistributed Corporate Profits with Inventory Valuation and Capital Consumption Adjustments (Line 5) plus Consumption of Fixed Capital by Domestic Business (Line 15) and Wage Accruals less Disbursements (Line 9). Gross Government Saving is calculated as Net Government Saving by Federal, State, and Local (Line 10) plus Consumption of Fixed Capital by Federal, State, and Local Governments (Line 17).

For the euro area, Denmark, Sweden, and the United Kingdom, data is taken from Eurostat: Income, Saving, and Lending by Institutional Sector. For each sector Net Saving is added to Consumption of Fixed Capital to calculate Gross Saving. Corporate Saving is the sum of Gross Saving for the Financial and Non-Financial Corporations. Household Saving includes data for non-profit institutions.

Data for Australia come from the Australian Bureau of Statistics. Household saving is calculated as Net Saving by Households plus Consumption of Fixed Capital by Households. Corporate Saving is calculated as Non-Household and Government Net Saving plus Non-Household Consumption of Fixed Capital. Government Saving is Net Saving by Government. Data on the consumption of fixed capital by the government sector was not available. As constructed, consumption of fixed capital by the government is implicated assigned to the corporate sector, boosting calculated corporate gross saving.

Data for Canada are taken from the OECD. Corporate Saving is constructed as Gross National Saving less Net Household Saving and Net General Government Saving. Implicitly, all consumption of fixed capital is being attributed to the corporate sector, thereby boosted gross corporate saving somewhat.

For Japan the data are taken from the Cabinet Office's Income and Outlay Accounts by Economic Sector.

Sample:

Albania, Algeria, Argentina, Australia, Austria, Bahrain, Bangladesh, Belgium, Benin, Bolivia, Botswana, Brazil, Bulgaria, Burkina Faso, Cameroon, Canada, Chile, China, Colombia, Congo D.R., Costa Rica, Côte d'Ivoire, Cyprus, Czech Republic, Denmark, Dominican Republic, Egypt, El Salvador, Fiji, Finland, France, Germany, Ghana, Greece, Guatemala, Haiti, Honduras, Hong Kong, Hungary, India, Indonesia, Iran, Ireland, Israel, Italy, Jamaica, Japan, Jordan, Kenya, Korea, Madagascar, Malaysia, Mauritius, Mexico, Morocco, Nepal, Netherlands, New Zealand, Norway, Oman, Pakistan, Panama, Paraguay, Peru, Philippines, Poland, Portugal, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Syria, Taiwan, Thailand, Trinidad and Tobago, Tunisia, Turkey, Uganda, United Kingdom, United States, Uruguay, Venezuela, Zimbabwe.

Table 1: Financial Development Indicators

Unweighted Sample Averages	Total Sample 2002-2006 (1)	Surplus* 2002-2006 (2)	Deficit** 2002-2006 (3)	United States 2002-2006 (4)	Non-US Industrial 2002-2006 (5)	Developing Asia*** 2002-2006 (6)
Private Credit / GDP	0.48	0.57	0.42	1.81	1.18	0.89
Bank Deposits / GDP	0.49	0.57	0.44	0.68	0.88	1.02
Non-Bank Deposits / GDP	0.15	0.13	0.17	1.46	0.66	0.27
Stock Market Capitalization/ GDP	0.59	0.77	0.52	1.26	0.79	1.12
Stock Market Turnover / GDP	0.51	0.53	0.41	1.44	0.88	0.91
Private Bond Market Capitalization / GDP	0.31	0.34	0.41	1.11	0.41	0.23

*       Large surplus defined as over 2 percent of GDP in 2002 - 2006 period.
**     Large deficit defined as over 2 percent of GDP in2002 - 2006 period.
***   Developing Asia includes China, Hong Kong, Indonesia, Korea, Malaysia, Philippines, Taiwan and Thailand.

Table 2: Standard Determinants

Determinants	1	2	3	4
Per Capita GDP	0.003	0.005	0.010	0.011
Per Capita GDP t-stat	3.200	3.806	4.475	4.628
ΔGrowth	0.032	0.066	-0.063	-0.010
ΔGrowth t-stat	0.396	1.043	-0.436	-0.102
Fiscal Balance	0.189	0.185	0.214	0.207
Fiscal Balance t-stat	2.864	3.333	2.616	3.063
NFA	0.018	0.016	0.013	0.011
NFA t-stat	2.765	2.603	2.526	2.713
Age Dependency Ratio	-0.025	-0.010	-0.068	-0.041
Age Dependency Ratio t-stat	-1.954	-0.574	-3.233	-1.627
Oil Balance / GDP	0.158	0.156	0.165	0.168
Oil Balance / GDP t-stat	3.130	3.038	2.452	2.367
Openness	0.012	0.006	0.010	0.000
Openness t-stat	1.996	1.099	1.012	0.064
Governance Indicators	-	-	-0.018	-0.015
Governance Indicators t-stat	-	-	-2.379	-2.133
U.S.(1997 - 2006)	-	-0.060	-	-0.077
U.S.(1997 - 2006) t-stat	-	-3.752	-	-4.174
Developing Asia (1997-2006)	-	0.047	-	0.047
Developing Asia (1997-2006) t-stat	-	4.666	-	8.520
#Obs	346	346	221	221
R²	0.313	0.364	0.372	0.445
SER	0.035	0.034	0.037	0.034

Panel regression with unreported constant and period fixed effects.
84-cross sections and 5 periods.
t-statistic reported underneath coefficient.
Bold indicates significance at the 10 percent level.
Developing Asia includes China, Hong Kong, Indonesia, Korea, Malaysia, Philippines, Taiwan and Thailand.

Table 3: Financial Variables

Determinants	1	2	3	4	5	6
Per Capita GDP	0.004	0.003	0.002	0.003	0.003	0.004
Per Capita GDP t-stat	2.815	2.314	0.924	1.756	2.483	4.342
ΔGrowth	0.062	0.076	-0.021	0.035	0.031	-0.037
ΔGrowth t-stat	0.722	0.886	-0.231	0.259	0.239	-0.203
Fiscal Balance	0.152	0.162	0.067	0.180	0.181	0.101
Fiscal Balance t-stat	2.318	2.426	1.114	1.891	1.820	0.717
NFA	0.009	0.009	0.003	0.026	0.022	0.025
NFA t-stat	1.563	1.552	0.382	2.798	3.484	3.707
Age Dependency Ratio	-0.005	0.000	-0.037	-0.004	0.012	0.006
Age Dependency Ratio t-stat	-0.297	0.015	-2.738	-0.221	0.637	0.203
Oil Balance / GDP	0.212	0.218	0.301	0.175	0.189	0.253
Oil Balance / GDP t-stat	3.047	3.141	4.634	2.477	2.611	3.134
Openness	0.014	0.012	0.024	0.008	0.014	0.012
Openness t-stat	2.162	1.887	1.991	1.233	1.788	1.237
Private Credit / GDP	0.006	-	-	-	-	-
Private Credit / GDP t-stat	0.720	-	-	-	-	-
Bank Assets / GDP	-	0.016	-	-	-	-
Bank Assets / GDP t-stat	-	2.416	-	-	-	-
Non-Bank Financial Assets / GDP	-	-	0.018	-	-	-
Non-Bank Financial Assets / GDP t-stat	-	-	1.324	-	-	-
Stock Market Cap / GDP	-	-	-	0.006	-	-
Stock Market Cap / GDP t-stat	-	-	-	0.747	-	-
Stock Market Turnover / GDP	-	-	-	-	0.014	-
Stock Market Turnover / GDP t-stat	-	-	-	-	2.540	-
Growth Stock Market Cap	-	-	-	-	-	-0.005
Growth Stock Market Cap t-stat	-	-	-	-	-	-4.359
#Obs	327	328	164	260	257	195
R²	0.334	0.342	0.492	0.321	0.343	0.357
SER	0.034	0.034	0.032	0.036	0.035	0.036

Panel regression with unreported constant and period fixed effects.
84 cross-sections and 5 periods.
t-statistic reported underneath coefficient.
Bold indicates significance at the 10 percent level.

Table 4: Financial Variables with Governance Indicators

Determinants	1	2	3	4	5	6
Per Capita GDP	0.011	0.010	0.005	0.010	0.011	0.012
Per Capita GDP t-stat	4.222	3.921	2.605	4.955	4.386	3.809
ΔGrowth	-0.045	-0.028	-0.224	-0.117	-0.096	-0.100
ΔGrowth t-stat	-0.323	-0.209	-1.520	-0.633	-0.537	-0.477
Fiscal Balance	0.191	0.204	-0.063	0.209	0.213	0.107
Fiscal Balance t-stat	2.379	2.402	-0.569	2.058	2.044	0.688
NFA	0.004	0.004	-0.010	0.011	0.013	0.016
NFA t-stat	0.687	0.700	-1.507	1.335	2.065	2.085
Age Dependency Ratio	-0.056	-0.050	-0.037	-0.048	-0.031	-0.032
Age Dependency Ratio t-stat	-2.317	-2.046	-2.051	-2.250	-1.270	-0.798
Oil Balance / GDP	0.210	0.215	0.397	0.173	0.176	0.235
Oil Balance / GDP t-stat	2.705	2.776	6.038	2.202	2.219	2.742
Openness	0.013	0.011	0.034	0.008	0.016	0.017
Openness t-stat	1.262	1.074	1.907	1.059	1.354	1.632
Governance Indicators	-0.020	-0.021	-0.003	-0.023	-0.021	-0.024
Governance Indicators t-stat	-2.089	-2.124	-0.382	-2.647	-2.562	-2.290
Private Credit / GDP	0.006	-	-	-	-	-
Private Credit / GDP t-stat	0.436	-	-	-	-	-
Bank Assets / GDP	-	0.015	-	-	-	-
Bank Assets / GDP t-stat	-	1.377	-	-	-	-
Non-Bank Financial Assets / GDP	-	-	0.011	-	-	-
Non-Bank Financial Assets / GDP t-stat	-	-	1.104	-	-	-
Stock Market Cap / GDP	-	-	-	0.010	-	-
Stock Market Cap / GDP t-stat	-	-	-	1.144	-	-
Stock Market Turnover / GDP	-	-	-	-	0.009	-
Stock Market Turnover / GDP t-stat	-	-	-	-	2.039	-
Growth Stock Market Cap	-	-	-	-	-	-0.149
Growth Stock Market Cap t-stat	-	-	-	-	-	-1.840
#Obs	213	214	103	194	192	174
R²	0.390	0.397	0.581	0.366	0.361	0.400
SER	0.036	0.036	0.032	0.036	0.036	0.035

Panel regression with unreported constant and period fixed effects.
84 cross-sections and 5 periods.
t-statistic reported underneath coefficient.
Bold indicates significance at the 10 percent level.

Table 5: Financial Variables with Governance Indicators

Determinants	1	2	3	4
Per Capita GDP	0.008	0.005	0.013	0.014
Per Capita GDP t-stat	8.425	5.566	4.484	4.110
ΔGrowth	0.039	-0.030	-0.017	-0.091
ΔGrowth t-stat	0.337	-0.160	-0.132	-0.443
Fiscal Balance	0.084	0.093	0.073	0.102
Fiscal Balance t-stat	0.841	0.672	0.640	0.673
NFA	0.022	0.024	0.015	0.014
NFA t-stat	3.716	3.697	2.299	1.883
Age Dependency Ratio	0.038	0.009	0.021	-0.035
Age Dependency Ratio t-stat	1.046	0.315	0.457	-0.870
Oil Balance / GDP	0.254	0.249	0.251	0.225
Oil Balance / GDP t-stat	3.099	3.098	2.643	2.712
Openness	0.000	0.010	0.005	0.016
Openness t-stat	0.002	1.062	0.714	1.527
Governance Indicators	-	-	-0.015	-0.026
Governance Indicators t-stat	-	-	-1.797	-2.478
Growth Stock Market Cap	-0.004	-0.005	-0.119	-0.138
Growth Stock Market Cap t-stat	-3.605	-4.453	-2.320	-1.799
U.S.(1997 - 2006)	-0.072	-0.065	-0.077	-0.076
U.S.(1997 - 2006) t-stat	-4.156	-3.934	-4.591	-4.533
Developing Asia (1997-2006)	0.056	-	0.050	-
Developing Asia (1997-2006) t-stat	7.055	-	7.706	-
#Obs	196	196	175	175
R²	0.467	0.374	0.499	0.427
SER	0.033	0.035	0.032	0.035

Panel regression with unreported constant and period fixed effects.
84 cross-sections and 5 periods.
t-statistic reported underneath coefficient.
Bold indicates significance at the 10 percent level.
Developing Asia includes China, Hong Kong, Indonesia, Korea, Malaysia, Philippines, Taiwan, and Thailand.

Table 6: Financial Variables - Industrial Country Sub-sample

Determinants	1	2	3	4	5	6	7
Per Capita GDP	0.011	0.010	0.009	0.011	0.011	0.012	0.017
Per Capita GDP t-stat	3.490	3.274	1.293	3.456	3.456	3.500	4.754
ΔGrowth	0.237	0.293	-0.128	0.302	0.302	0.071	0.009
ΔGrowth t-stat	0.806	1.060	-0.460	1.103	1.135	0.243	0.031
Fiscal Balance	0.183	0.180	0.313	0.160	0.151	0.349	0.269
Fiscal Balance t-stat	1.286	1.223	1.938	1.033	0.979	2.864	2.850
NFA	0.042	0.036	0.045	0.033	0.034	0.044	0.041
NFA t-stat	6.929	5.081	1.175	3.666	4.731	5.362	5.963
Age Dependency Ratio	-0.025	0.003	-0.044	0.049	0.073	0.044	0.014
Age Dependency Ratio t-stat	-0.211	0.022	-0.305	0.492	0.652	0.377	0.202
Openness	0.039	0.040	0.055	0.042	0.045	0.034	0.029
Openness t-stat	8.339	9.692	2.557	6.261	5.997	2.826	2.072
Private Credit / GDP	-0.016	-	-	-	-	-	-0.021
Private Credit / GDP t-stat	-1.388	-	-	-	-	-	-2.161
Bank Assets / GDP	-	0.005	-	-	-	-	-
Bank Assets / GDP t-stat	-	0.727	-	-	-	-	-
Non-Bank Financial Assets / GDP	-	-	-0.002	-	-	-	-
Non-Bank Financial Assets / GDP t-stat	-	-	-0.117	-	-	-	-
Stock Market Cap / GDP	-	-	-	0.005	-	-	-
Stock Market Cap / GDP t-stat	-	-	-	0.471	-	-	-
Stock Market Turnover / GDP	-	-	-	-	0.012	-	-
Stock Market Turnover / GDP t-stat	-	-	-	-	1.166	-	-
Growth Stock Market Cap	-	-	-	-	-	-0.097	-0.067
Growth Stock Market Cap t-stat	-	-	-	-	-	-1.295	-1.427
U.S.(1997 - 2006)	-	-	-	-	-	-	-0.057
U.S.(1997 - 2006) t-stat	-	-	-	-	-	-	-3.643
#Obs	105	105	37	85	85	64	64
R²	0.502	0.489	0.540	0.496	0.502	0.516	0.583
SER	0.029	0.030	0.029	0.031	0.031	0.033	0.030

Panel regression with unreported constant and period fixed effects.
21 cross-sections and 5 periods.
t-statistic reported underneath coefficient.
Bold indicates significance at the 10 percent level.

Table 7: Industrial Country Sub-sample - Additional Financial Variables

Determinants	1	2	3	4	5	6
Per Capita GDP	0.009	0.015	0.015	0.017	0.017	0.017
Per Capita GDP t-stat	2.515	7.377	7.053	4.996	6.440	6.374
ΔGrowth	0.151	0.291	0.252	0.251	0.345	0.364
ΔGrowth t-stat	0.659	1.198	1.056	0.948	1.369	1.239
Fiscal Balance	0.267	0.261	0.287	0.160	0.247	0.215
Fiscal Balance t-stat	2.085	2.192	3.172	1.579	1.667	1.703
NFA	0.053	0.060	0.058	0.053	0.050	0.047
NFA t-stat	5.661	4.667	5.842	6.547	4.658	4.548
Age Dependency Ratio	-0.003	-0.151	-0.149	-0.183	-0.086	-0.065
Age Dependency Ratio t-stat	-0.031	-1.173	-1.212	-1.328	-0.656	-0.691
Openness	0.040	0.036	0.034	0.036	0.039	0.034
Openness t-stat	8.679	3.981	3.315	3.895	5.572	3.666
Real Interest Rate Differential	0.011	0.019	0.019	0.017	0.017	0.017
Real Interest Rate Differential t-stat	3.637	3.138	3.064	3.691	3.486	4.462
Financial System Deposits / GDP	0.014	-	-	-	-	-
Financial System Deposits / GDP t-stat	1.897	-	-	-	-	-
Bank Overhead Costs / Total Assets	-	-0.246	-	-	-	-
Bank Overhead Costs / Total Assets t-stat	-	-0.768	-	-	-	-
Net Interest Margin	-	-	-0.357	-	-	-
Net Interest Margin t-stat	-	-	-0.926	-	-	-
Bank Concentration	-	-	-	0.036	-	-
Bank Concentration t-stat	-	-	-	1.176	-	-
Private Bond Market Capitalization / GDP	-	-	-	-	-0.020	-0.005
Private Bond Market Capitalization / GDP t-stat	-	-	-	-	-2.129	-0.853
U.S.(1997 - 2006)	-	-	-	-	-	-0.064
U.S.(1997 - 2006) t-stat	-	-	-	-	-	-6.895
#Obs	102	78	77	78	78	78
R²	0.549	0.626	0.634	0.640	0.615	0.659
SER	0.028	0.027	0.027	0.026	0.027	0.025

Panel regression with unreported constant and period fixed effects.
21 cross-sections and 5 periods.
t-statistic reported underneath coefficient.
Bold indicates significance at the 10 percent level.

Table 8: Interest Rate Differentials - Industrial Country Sub-sample

Determinants	1	2	3	4
Per Capita GDP	0.010	0.012	0.017	0.017
Per Capita GDP t-stat	3.158	3.074	6.440	6.374
ΔGrowth	0.153	0.155	0.345	0.364
ΔGrowth t-stat	0.622	0.600	1.369	1.239
Fiscal Balance	0.234	0.190	0.247	0.215
Fiscal Balance t-stat	1.730	1.565	1.667	1.703
NFA	0.054	0.051	0.050	0.047
NFA t-stat	6.133	5.712	4.658	0.010
Age Dependency Ratio	-0.024	-0.008	-0.086	-0.065
Age Dependency Ratio t-stat	-0.228	-0.074	-0.656	-0.691
Openness	0.039	0.035	0.039	0.034
Openness t-stat	7.855	5.468	5.572	3.666
Real Interest Rate Differential	0.010	0.010	0.017	0.017
Real Interest Rate Differential t-stat	3.132	3.251	3.486	4.462
Private Bond Market Capitalization / GDP	-	-	-0.020	-0.005
Private Bond Market Capitalization / GDP t-stat	-	-	-2.129	-0.853
U.S.(1997 - 2006)	-	-0.057	-	-0.064
U.S.(1997 - 2006) t-stat	-	-3.289	-	-6.895
#Obs	102	102	78	78
R²	0.544	0.574	0.615	0.659
SER	0.028	0.027	0.027	0.025

Panel regression with unreported constant and period fixed effects.
21 cross-sections and 5 periods.
t-statistic reported underneath coefficient.
Bold indicates significance at the 10 percent level.

Table 9: Dependent Variable: 10-yr. Nominal Government Bond Yields (Model Without Expectational Variables)

Determinant	U.S.	U.K.	Australia	Austria	Belgium	Canada	Denmark	Finland	France	Germany	Italy
Money Market Interest Rate	0.126	-0.048	0.076	0.075	0.047	0.135	0.099	0.120	0.095	-0.013	0.183
t-Stat	2.495	-0.565	3.005	3.767	1.605	3.028	3.125	3.690	2.761	-0.290	3.332
Inflation	0.069	0.191	0.035	0.047	0.037	0.051	0.222	0.047	0.068	0.089	0.067
t-Stat	1.889	2.175	2.539	2.715	0.931	1.635	4.354	2.352	2.957	1.492	1.791
Real GDP Growth	0.072	0.142	0.048	0.017	0.038	0.041	0.026	0.002	0.034	0.018	-0.002
t-Stat	3.109	1.997	2.359	1.312	1.936	1.705	0.842	0.097	1.260	1.633	-0.079
Interest Rate Volatility	0.830	0.886	0.250	-0.061	0.049	0.732	0.239	0.842	0.757	0.781	0.340
t-Stat	1.926	1.392	0.591	-0.216	0.074	1.860	0.637	3.478	3.149	0.804	0.901
Fiscal Balance / GDP	-0.047	-0.007	-0.038	-0.057	-0.039	-0.031	-0.024	-0.019	0.069	0.057	-0.018
t-Stat	-1.282	-0.206	-1.060	-2.621	-2.451	-1.278	-0.623	-0.700	1.502	1.659	-0.634
10-yr. Int. Rate (-1)	0.821	0.962	1.009	1.174	1.188	0.888	1.031	1.156	1.034	1.184	1.190
t-Stat	5.788	8.148	7.781	14.666	12.967	8.233	9.366	16.584	8.552	7.644	12.067
10-yr. Int. Rate (-2)	-0.086	-0.111	-0.137	-0.333	-0.301	-0.175	-0.269	-0.398	-0.221	-0.291	-0.479
t-Stat	-0.751	-1.187	-1.179	-4.967	-3.830	-1.906	-1.956	-6.467	-2.434	-2.372	-5.860
Adjusted R-squared	0.969	0.969	0.973	0.980	0.988	0.968	0.987	0.978	0.987	0.966	0.988
S.E of Regression	0.464	0.329	0.527	0.275	0.332	0.517	0.605	0.444	0.409	0.277	0.537
Durbin-Watson Statistic	1.745	1.846	1.859	1.802	1.915	1.936	1.748	1.898	1.752	1.739	1.870
Sample	74q2 06q4	91q1 06q4	74q2 06q4	74q2 06q4	81q1 06q4	75q1 06q4	78q1 06q4	78q1 06q4	74q2 06q4	91q1 06q4	81q1 06q4
Number of Observations	131	64	131	131	104	128	116	116	131	64	104

Table 9: Dependent Variable: 10-yr. Nominal Government Bond Yields (Model Without Expectational Variables) - continued

Determinant	Japan	Netherlands	New Zealand	Norway	Portugal	Spain	Sweden	Switzerland
Money Market Interest Rate	0.082	0.060	0.077	0.058	0.145	0.123	0.062	0.063
t-Stat	1.627	1.444	2.100	2.288	2.126	3.107	4.998	3.254
Inflation	-0.003	0.064	0.000	0.050	0.167	0.114	0.055	0.052
t-Stat	-0.170	1.876	0.015	2.801	4.085	3.540	2.704	2.510
Real GDP Growth	0.031	0.099	-0.003	0.026	0.130	0.037	0.065	0.028
t-Stat	1.312	3.727	-0.113	1.516	2.239	1.122	3.489	2.172
Interest Rate Volatility	0.220	0.505	0.287	0.034	-0.047	0.679	0.201	0.122
t-Stat	0.730	0.934	1.019	0.129	-0.291	1.439	0.748	0.387
Fiscal Balance / GDP	-0.026	-0.092	-0.050	0.040	-0.002	-0.043	-0.002	NA
t-Stat	-1.038	-3.339	-0.820	2.258	-0.048	-0.615	-0.121	NA
10-yr. Int. Rate (-1)	0.842	0.988	0.986	1.093	0.867	1.078	1.261	1.085
t-Stat	7.777	7.489	5.682	10.146	8.793	9.961	22.616	10.175
10-yr. Int. Rate (-2)	0.049	-0.168	-0.171	-0.250	-0.095	-0.353	-0.390	-0.283
t-Stat	0.569	-1.517	-1.171	-2.369	-1.164	-3.293	-6.315	-2.693
Adjusted R-squared	0.973	0.974	0.977	0.985	0.987	0.985	0.980	0.952
S.E of Regression	0.444	0.339	0.505	0.402	1.007	0.556	0.447	0.250
Durbin-Watson Statistic	2.005	1.643	1.858	1.920	2.084	1.847	1.849	1.794
Sample	74q2 06q4	80q1 06q4	86q1 06q4	79q1 06q4	81q1 06q4	80q1 06q4	74q2 06q4	75q4 06q4
Number of Observations	131.000	108.000	84.000	112.000	104.000	108.000	131.000	125.000

Table 10: Dependent Variable: 10-yr Nominal Government Bond Yields (Model with Expectational Variables)

Determinant	U.S.	U.K.	Canada	France	Netherlands	Italy	Japan	Norway	Spain	Sweden	Switzerland
Inflation Expectations (10-yr.)	0.772	0.595	0.050	0.851	NA	0.754	0.214	NA	NA	NA	NA
t-Stat	3.611	2.002	0.152	3.560	NA	3.339	1.472	NA	NA	NA	NA
Inflation Expectations (1-yr.)	NA	NA	NA	NA	-0.053	NA	NA	0.198	0.501	0.254	0.221
t-Stat	NA	NA	NA	NA	-0.587	NA	NA	1.308	3.575	2.711	1.450
10-yr. minus 1-yr. Inflation Expectations	-0.275	-0.089	-0.257	0.014	NA	0.041	-0.037	NA	NA	NA	NA
t-Stat	-1.242	-1.659	-1.646	0.046	NA	0.268	-0.220	NA	NA	NA	NA
Money Market Interest Rate	0.014	-0.050	0.168	-0.002	0.053	0.225	0.136	0.114	0.089	0.051	0.108
t-Stat	0.282	-0.581	2.177	-0.064	1.287	4.872	2.874	2.686	1.845	7.108	1.942
Interest Rate Volatility	0.783	0.663	2.383	0.560	0.293	0.560	0.679	0.555	2.950	0.974	0.441
t-Stat	1.337	1.018	3.560	1.380	0.334	1.577	0.972	0.969	5.595	2.853	0.863
GDP Growth Expectations (1-yr.)	0.072	0.192	0.199	0.482	0.052	0.215	0.053	0.169	0.386	0.134	0.196
t-Stat	1.053	1.996	1.833	4.308	0.654	1.998	0.889	1.262	3.708	1.227	1.470
Fiscal Balance	0.060	0.036	-0.055	-0.042	0.006	-0.005	-0.035	0.015	-0.177	-0.039	-0.032
t-Stat	1.490	1.093	-1.304	-0.791	0.257	-0.082	-1.140	0.422	-2.231	-1.269	-0.794
10-yr. Int. Rate (-1)	0.895	0.991	0.781	0.954	1.290	0.970	0.673	1.090	0.938	1.119	0.988
t-Stat	7.734	7.828	6.654	8.975	10.661	9.631	3.638	9.986	11.606	14.466	7.189
10-yr. Int. Rate (-2)	-0.320	-0.239	-0.235	-0.295	-0.391	-0.465	0.001	-0.393	-0.511	-0.418	-0.423
t-Stat	-2.574	-1.801	-2.053	-3.622	-3.907	-7.183	0.013	-3.060	-6.087	-4.912	-3.749
Adjusted R-squared	0.929	0.969	0.960	0.977	0.968	0.990	0.971	0.958	0.988	0.974	0.967
S.E of Regression	0.345	0.326	0.374	0.287	0.297	0.371	0.313	0.400	0.389	0.453	0.246
Durbin-Watson Statistic	2.011	1.959	1.760	1.892	1.922	1.986	1.836	1.776	2.065	1.886	1.774
Sample	90q2 06q4	91q1 06q4	90q2 06q4	90q2 06q4	90q2 06q4	90q2 06q4	90q2 06q4	90q2 06q4	90q2 06q4	90q2 06q4	90q2 06q4
Number of Observations	67	64	67	67	67	67	67	67	67	67	67

Table 11: Dependent Variable: Log Change in Real Household Consumption

Determinant	U.S.	U.K.	Canada	France	Germany	Italy	Japan
Log (Real Consumption / Real Disposable Income) (-1)	-0.123	-0.194	-0.113	-0.001	-0.204	-0.010	-0.051
t-Stat	-4.439	-3.176	-1.753	-0.021	-2.433	-0.400	-2.329
Household Wealth / Disposable Income (-1)	0.008	0.007	0.009	-0.001	0.005	-0.001	0.000
t-Stat	5.972	2.698	1.333	-1.621	1.142	-2.558	0.422
Real Money Market Interest Rate (-1)	-0.070	-0.040	-0.143	-0.081	-0.015	-0.072	0.022
t-Stat	-2.547	-0.493	-2.781	-2.097	-0.171	-1.244	0.319
Change in the Log of Real Disposable Income	0.087	0.127	0.323	0.063	0.797	0.260	0.192
t-Stat	1.155	1.642	2.770	0.902	12.924	1.358	1.756
Adjusted R-squared	0.200	0.098	0.229	0.050	0.768	0.238	0.103
S.E of Regression	0.004	0.006	0.006	0.005	0.005	0.006	0.009
Durbin-Watson Statistic	2.146	1.671	2.188	2.308	2.359	1.978	2.668
Sample	85q2 06q4	91q2 06q1	85q2 06q4	85q2 06q1	91q2 06q1	85q2 05q1	85q2 06q1
Number of Observations	87	60	87	84	60	80	84

Figure 1a

Data for Figure 1a immediately follows

Data for Figure 1a

Country	CA	Private Credit by Deposit Money Banks and Other Financial Institutions / GDP	Bank Deposits / GDP	Non-Bank Financial Assets / GDP
Albania	-0.0574	0.0813	0.451	-
Algeria	0.1601	0.1061	0.4206	-
Angola	0.0742	0.0423	0.1157	-
Argentina	0.0435	0.1233	0.2159	0.0038
Australia	-0.0529	0.9714	0.6989	-
Austria	0.0142	1.0514	0.8283	-
Bahamas, The	-0.123	0.7497	0.6783	0.0257
Bahrain	0.061	0.5769	0.5895	0.1314
Bangladesh	0.0031	0.3038	0.4591	-
Barbados	-0.0927	0.5823	0.8063	0.082
Belgium	0.0337	0.7394	0.933	-
Belize	-0.1341	0.6158	0.4962	0.1271
Benin	-0.0732	0.1367	0.1736	-
Bhutan	-0.1131	0.13	0.4132	-
Bolivia	0.038	0.4291	0.4108	0.0954
Botswana	0.091	0.1865	0.2788	-
Brazil	0.0077	0.2905	0.4536	0.0106
Bulgaria	-0.0847	0.3001	0.3564	-
Burkina Faso	-0.1017	0.1368	0.1364	-
Burundi	-0.0755	0.2373	0.1832	0.0326
Cameroon	-0.0296	0.0881	0.1282	-
Canada	0.0177	1.7165	1.4666	0.6094
Cape Verde	-0.093	0.4004	0.6138	-
Central African Republic	-0.0318	0.0629	0.0419	-
Chad	-0.3326	0.0334	0.0381	-
Chile	0.0099	0.7327	0.4629	0.1395
Colombia	-0.015	0.231	0.2352	0.0621
Congo, Democratic Republic of	-0.0424	0.0096	0.027	-
Congo, Republic of	0.0563	0.0321	0.0653	-
Costa Rica	-0.0482	0.3051	0.3851	-
Côte dIvoire	0.0272	0.1393	0.1482	-
Cyprus	-0.045	1.1946	1.1427	-
Czech Republic	-0.0439	0.3257	0.598	-
Denmark	0.0304	1.5565	0.5172	-
Dominica	-0.2193	0.5933	0.8453	-
Dominican Republic	0.0075	0.2721	0.2636	0.0671
Ecuador	-0.007	0.2069	0.1991	0.006
Egypt	0.023	0.5815	0.7624	0.0716
El Salvador	-0.0416	0.4223	0.3901	0.0008
Equatorial Guinea	-0.1125	0.0311	0.0564	-
Ethiopia	-0.0549	0.2139	0.3562	0.0349
Fiji	-0.0941	0.3666	0.3931	0.078
Finland	0.0688	0.6535	0.4749	-
France	-0.0001	0.887	0.6592	-
Gabon	0.1347	0.0995	0.1298	-
Gambia, The	-0.1341	0.131	0.3022	-
Germany	0.0357	1.1294	0.9649	-
Ghana	-0.0345	0.1241	0.1964	-
Greece	-0.0647	0.7229	0.8378	-
Grenada	-0.2509	0.8076	1.0959	-
Guatemala	-0.052	0.2144	0.2792	0.0131
Guinea-Bissau	-0.0602	0.0236	0.0852	-
Guyana	-0.123	0.5674	0.8169	0.1271
Haiti	-0.004	0.1499	0.3275	-
Honduras	-0.0312	0.4018	0.4231	0.0443

Figure 1b

Data for Figure 1b immediately follows

Data for Figure 1b

Country	CA	Stock Market Capitalization / GDP	Stock Market Turnover Ratio
Albania	-0.0574	-	-
Algeria	0.1601	-	-
Angola	0.0742	-	-
Argentina	0.0435	0.5858	0.1244
Australia	-0.0529	0.9785	0.7662
Austria	0.0142	0.2233	0.3059
Bahamas, The	-0.123	-	-
Bahrain	0.061	0.9801	0.0438
Bangladesh	0.0031	0.0406	0.3535
Barbados	-0.0927	1.4232	0.1091
Belgium	0.0337	0.9723	0.2076
Belize	-0.1341	-	-
Benin	-0.0732	-	-
Bhutan	-0.1131	-	-
Bolivia	0.038	0.1936	0.0059
Botswana	0.091	0.2558	0.0288
Brazil	0.0077	0.4159	0.3563
Bulgaria	-0.0847	0.1173	0.2465
Burkina Faso	-0.1017	-	-
Burundi	-0.0755	-	-
Cameroon	-0.0296	-	-
Canada	0.0177	1.0044	0.6314
Cape Verde	-0.093	-	-
Central African Republic	-0.0318	-	-
Chad	-0.3326	-	-
Chile	0.0099	0.9801	0.1204
Colombia	-0.015	0.233	0.1059
Congo, Democratic Republic of	-0.0424	-	-
Congo, Republic of	0.0563	-	-
Costa Rica	-0.0482	0.1195	0.1017
Côte dIvoire	0.0272	0.1329	0.0206
Cyprus	-0.045	0.4098	0.0699
Czech Republic	-0.0439	0.2335	0.7314
Denmark	0.0304	0.5363	0.7299
Dominica	-0.2193	-	-
Dominican Republic	0.0075	-	-
Ecuador	-0.007	0.075	0.0431
Egypt	0.023	0.5002	0.2733
El Salvador	-0.0416	0.1394	0.0631
Equatorial Guinea	-0.1125	-	-
Ethiopia	-0.0549	-	-
Fiji	-0.0941	0.1801	0.0097
Finland	0.0688	1.0485	1.1826
France	-0.0001	0.7547	0.8379
Gabon	0.1347	-	-
Gambia, The	-0.1341	-	-
Germany	0.0357	0.4141	1.3384
Ghana	-0.0345	0.1575	0.0296
Greece	-0.0647	0.5611	0.4019
Grenada	-0.2509	-	-
Guatemala	-0.052	-	-
Guinea-Bissau	-0.0602	-	-
Guyana	-0.123	0.1703	0.0183
Haiti	-0.004	-	-
Honduras	-0.0312	-	-

Figure 2: Long-term Nominal Interest Rates and OECD Weighted Average

Data for Figure 2 immediately follows

Data for Figure 2

Date	Nominal OECD Weighted Average	US	UK	CANADA	AUSTRALIA	SPAIN	FRANCE
1980Q1	11.73248	11.987	14.693	12.507	10.628	15.54	13.69
1980Q2	11.17606	10.477	14.103	11.747	11.697	15.647	13.593
1980Q3	11.22294	10.953	13.417	12.19	11.8	16.107	13.58
1980Q4	11.99529	12.423	13.44	12.91	12.262	16.55	14.273
1981Q1	12.33585	12.96	13.823	13.163	13.063	16.217	14.87
1981Q2	13.09033	13.75	14.25	14.783	13.093	15.787	16.513
1981Q3	13.96645	14.847	15.44	16.447	14.385	15.27	17.073
1981Q4	13.57279	14.087	16.02	15.563	15	15.973	16.71
1982Q1	13.46878	14.293	15.013	15.477	15.062	15.8	16.353
1982Q2	13.22331	13.93	13.947	15.197	15.804	16	16.133
1982Q3	12.78666	13.117	12.357	15.017	16.251	16.063	15.837
1982Q4	11.3374	10.667	11.023	12.051	14.522	16.087	15.667
1983Q1	10.94286	10.563	11.68	11.328	13.568	15.677	14.847
1983Q2	10.88548	10.543	11.07	10.941	14.17	16.707	14.54
1983Q3	11.43479	11.627	11.5	11.709	14.69	17.44	14.01
1983Q4	11.32199	11.687	10.823	11.616	13.541	17.813	14.077
1984Q1	11.3259	11.943	10.767	12.144	13.826	17.113	13.87
1984Q2	11.99105	13.2	11.273	13.514	13.906	17.41	13.873
1984Q3	11.78511	12.867	11.57	13.137	13.174	16.75	13.513
1984Q4	10.87996	11.743	10.9	12.046	13.294	14.817	12.36
1985Q1	10.72908	11.583	11.393	11.807	13.541	13.293	12.213
1985Q2	10.29277	10.813	11.11	11.045	13.769	13.587	11.94
1985Q3	9.908826	10.337	10.713	10.661	13.542	14.25	11.933
1985Q4	9.555292	9.76	10.663	10.135	14.751	12.34	11.38
1986Q1	8.555327	8.557	10.517	9.804	13.894	12.313	10.06
1986Q2	7.703841	7.603	9.18	8.967	12.583	11.46	8.597
1986Q3	7.539147	7.307	9.85	8.9	13.86	11.377	8.37
1986Q4	7.727067	7.263	10.993	8.912	13.557	10.267	9.45
1987Q1	7.476387	7.193	9.783	8.357	13.705	10.76	8.92
1987Q2	7.779877	8.343	8.957	9.251	12.948	12.89	8.933
1987Q3	8.617311	8.877	9.877	10.13	12.781	13.917	9.803
1987Q4	8.599736	9.123	9.667	10.145	13.131	13.687	10.247
1988Q1	7.904772	8.417	9.483	9.446	12.347	12.203	9.41
1988Q2	8.118856	8.91	9.373	9.786	11.879	11.077	9.13
1988Q3	8.450199	9.1	9.95	10.097	11.851	11.207	9.047
1988Q4	8.208508	8.957	9.897	9.995	12.186	12.49	8.733
1989Q1	8.566076	9.207	9.853	10.299	13.479	13.327	8.903
1989Q2	8.555607	8.773	10.3	9.886	13.654	13.637	8.777
1989Q3	8.227034	8.107	10.09	9.4	13.233	13.339	8.507
1989Q4	8.442725	7.907	10.52	9.537	13.35	14.1	9.003
1990Q1	9.318909	8.423	11.547	10.331	13.133	14.657	9.863
1990Q2	9.462515	8.677	12.317	11.132	13.548	14.637	9.637
1990Q3	9.627514	8.703	12.03	10.769	13.423	14.753	10.063
1990Q4	9.425543	8.397	11.317	10.677	12.666	14.663	10.167
1991Q1	8.890445	8.017	10.337	9.778	11.623	13.933	9.333
1991Q2	8.778943	8.13	10.383	9.674	10.992	12.103	8.96
1991Q3	8.649345	7.94	9.983	9.719	10.771	11.94	9.043
1991Q4	8.181826	7.347	9.717	8.686	9.822	11.465	8.81
1992Q1	7.965538	7.303	9.48	8.398	9.971	10.838	8.53
1992Q2	8.049139	7.377	9.19	8.532	9.282	11.02	8.67
1992Q3	7.789461	6.617	9.197	7.518	8.683	12.232	8.897
1992Q4	7.597487	6.743	8.387	7.796	8.851	12.691	8.253
1993Q1	6.867851	6.28	7.987	7.705	8.361	11.645	7.673
1993Q2	6.667722	5.99	8	7.485	7.596	11.09	7.093
1993Q3	6.039251	5.617	7.217	7.02	6.909	9.598	6.4
1993Q4	5.659614	5.607	6.667	6.766	6.667	8.51	5.933
1994Q1	5.881241	6.067	6.787	6.864	6.906	8.298	5.993
1994Q2	6.709142	7.083	8.347	8.476	8.698	9.63	7.05
1994Q3	7.24745	7.333	8.787	8.986	9.635	10.829	7.703
1994Q4	7.554877	7.837	8.743	9.095	10.334	11.233	8.117
1995Q1	7.410889	7.483	8.733	8.96	10.206	11.906	8.087
1995Q2	6.673136	6.62	8.293	8.1	9.254	11.68	7.597
1995Q3	6.369995	6.323	8.137	8.098	8.964	11.036	7.37
1995Q4	6.027518	5.893	7.803	7.482	8.419	10.461	7.087
1996Q1	6.057014	5.91	7.767	7.337	8.39	9.687	6.557
1996Q2	6.375112	6.72	8.077	7.772	8.879	9.201	6.503
1996Q3	6.243103	6.78	7.87	7.454	8.224	8.691	6.337
1996Q4	5.687487	6.343	7.577	6.403	7.344	7.367	5.847
1997Q1	5.740754	6.563	7.407	6.484	7.584	6.867	5.597
1997Q2	5.795521	6.697	7.317	6.547	7.583	6.677	5.713
1997Q3	5.411037	6.243	6.983	5.945	6.535	6.2	5.523
1997Q4	5.10476	5.907	6.493	5.596	6.117	5.86	5.493
1998Q1	4.841093	5.587	6.023	5.408	5.853	5.243	5.03
1998Q2	4.740729	5.597	5.783	5.341	5.633	5.07	4.943
1998Q3	4.388381	5.203	5.477	5.39	5.502	4.717	4.5
1998Q4	3.937795	4.67	4.803	4.991	4.984	4.307	4.087
1999Q1	4.101157	4.983	4.47	5.087	5.318	4.053	3.947
1999Q2	4.361508	5.54	4.893	5.311	5.813	4.32	4.203
1999Q3	4.847405	5.883	5.46	5.647	6.272	5.13	5.003
1999Q4	5.058247	6.14	5.503	6.104	6.633	5.407	5.283
2000Q1	5.276166	6.48	5.603	6.309	6.902	5.68	5.57
2000Q2	5.060409	6.177	5.303	6.013	6.301	5.513	5.383
2000Q3	4.953245	5.893	5.283	5.792	6.175	5.53	5.393
2000Q4	4.747386	5.567	5.053	5.606	5.88	5.38	5.23
2001Q1	4.41609	5.05	4.813	5.383	5.286	5.08	4.903
2001Q2	4.589198	5.27	5.097	5.706	5.806	5.29	5.12
2001Q3	4.439605	4.98	5.047	5.561	5.809	5.217	5.013
2001Q4	4.237531	4.77	4.787	5.255	5.561	4.88	4.72
2002Q1	4.567779	5.077	5.053	5.452	6.038	5.167	5.057
2002Q2	4.614182	5.1	5.223	5.57	6.172	5.31	5.203
2002Q3	4.029347	4.26	4.737	5.11	5.648	4.81	4.697
2002Q4	3.806545	4.007	4.607	5.057	5.518	4.55	4.487
2003Q1	3.614642	3.92	4.317	4.975	5.238	4.097	4.11
2003Q2	3.403765	3.62	4.267	4.662	5.059	3.923	3.933
2003Q3	3.840198	4.233	4.553	4.786	5.423	4.143	4.133
2003Q4	3.974196	4.287	4.943	4.792	5.747	4.337	4.343
2004Q1	3.775524	4.02	4.767	4.431	5.579	4.117	4.107
2004Q2	4.144271	4.6	5.08	4.777	5.869	4.307	4.307
2004Q3	3.970743	4.303	4.99	4.674	5.572	4.17	4.157
2004Q4	3.744407	4.173	4.653	4.454	5.345	3.82	3.827
2005Q1	3.735228	4.297	4.63	4.276	5.467	3.633	3.643
2005Q2	3.543824	4.16	4.443	4.026	5.299	3.36	3.373
2005Q3	3.517343	4.213	4.28	3.901	5.198	3.18	3.233
2005Q4	3.713274	4.49	4.297	4.064	5.394	3.373	3.39
2006Q1	3.832295	4.57	4.093	4.125	5.272	3.487	3.513
2006Q2	4.293666	5.07	4.55	4.43	5.689	3.967	3.99
2006Q3	4.167058	4.897	4.587	4.266	5.736	3.89	3.9
2006Q4	4.009329	4.63	4.573	4.026	5.653	3.793	3.787

Data for Figure 2 continued

Date	JAPAN	SWITZ	GERMANY	NORWAY	ITALY	BELGIUM
1980Q1	9.286	4.767	8.717	10.15	14.263	11.587
1980Q2	8.916	4.837	8.817	10.243	15.04	11.973
1980Q3	8.578	4.78	8.05	10.447	15.577	11.767
1980Q4	8.701	4.667	8.683	10.387	16.13	12.273
1981Q1	8.082	5.153	9.75	11.593	16.583	12.96
1981Q2	8.157	5.65	10.45	12.45	18.923	13.38
1981Q3	8.817	5.827	10.717	12.633	20.713	13.71
1981Q4	8.451	5.65	10.05	12.573	21.21	13.697
1982Q1	7.954	5.267	9.75	13.333	20.583	13.813
1982Q2	8.255	4.887	9.083	13.14	20.647	13.63
1982Q3	8.647	4.387	9.117	13.163	20.04	13.33
1982Q4	8.288	3.853	8.283	13.177	19.59	12.94
1983Q1	7.773	3.953	7.85	13.107	19.09	12.44
1983Q2	7.924	4.173	7.983	12.927	18.297	11.797
1983Q3	7.969	4.347	8.483	12.747	18.107	11.593
1983Q4	7.584	4.223	8.45	12.653	17.703	11.933
1984Q1	7.38	4.359	8.35	12.503	16.31	12.417
1984Q2	7.617	4.545	8.317	12.44	15.677	12.393
1984Q3	7.61	4.653	8.183	12.02	15.367	12.203
1984Q4	6.663	4.655	7.517	11.677	15.043	11.957
1985Q1	6.767	4.834	7.65	12.682	13.357	11.737
1985Q2	6.7	4.758	7.35	12.886	13.79	11.29
1985Q3	6.19	4.705	6.817	12.999	13.99	10.743
1985Q4	6.29	4.503	6.817	13.076	13.713	10.103
1986Q1	5.19	4.282	6.45	13.445	13.553	9.84
1986Q2	5.123	4.361	6.117	13.111	11.337	8.45
1986Q3	4.88	4.205	6.15	13.304	10.767	8.063
1986Q4	5.4	4.072	6.417	13.331	10.215	8.15
1987Q1	4.797	3.991	6.183	13.453	9.883	8.19
1987Q2	4.12	4.04	5.95	13.422	10.229	8.057
1987Q3	5.963	4.123	6.617	13.155	11.167	8.07
1987Q4	5.203	3.978	6.683	13.188	11.293	8.42
1988Q1	4.29	3.932	6.45	13.318	10.568	7.87
1988Q2	4.65	3.922	6.583	13.016	10.798	7.89
1988Q3	5.52	4.157	6.817	12.83	11.107	8.177
1988Q4	4.707	4.068	6.55	12.413	11.11	8.093
1989Q1	4.947	4.751	6.983	10.964	11.81	8.327
1989Q2	5.207	5.195	7.083	10.71	12.576	8.387
1989Q3	5.006	5.284	6.983	10.759	13.02	8.443
1989Q4	5.349	5.559	7.517	10.868	13.743	9.19
1990Q1	6.709	6.4	8.233	10.663	13.99	10.283
1990Q2	6.612	6.392	8.733	10.833	13.479	9.973
1990Q3	7.475	6.402	8.867	10.601	13.22	9.947
1990Q4	7.045	6.603	9	10.618	13.456	10.043
1991Q1	6.444	6.279	8.567	10.472	13.783	9.507
1991Q2	6.671	5.944	8.4	9.945	13.195	9.223
1991Q3	6.388	6.146	8.567	9.735	13.267	9.37
1991Q4	5.844	6.589	8.3	9.834	12.883	9.143
1992Q1	5.519	6.308	7.967	9.397	12.619	8.763
1992Q2	5.696	6.813	8.067	9.401	12.789	8.87
1992Q3	5.18	6.713	7.967	9.887	13.807	8.933
1992Q4	4.91	5.76	7.4	9.742	13.848	8.07
1993Q1	4.483	4.991	6.933	8.333	13.131	7.517
1993Q2	4.791	4.68	6.767	7.111	12.414	7.33
1993Q3	4.313	4.427	6.4	6.306	10.109	7.087
1993Q4	3.696	4.11	5.967	5.779	9.093	6.933
1994Q1	4.03	4.307	6.067	5.737	8.961	6.763
1994Q2	4.118	4.908	6.767	7.299	9.631	7.517
1994Q3	4.65	5.3	7.167	8.25	11.387	8.19
1994Q4	4.654	5.319	7.5	8.453	12.096	8.34
1995Q1	4.411	5.183	7.433	8.05	12.738	8.247
1995Q2	3.318	4.72	6.933	7.592	12.695	7.47
1995Q3	3.059	4.406	6.733	7.354	11.804	7.063
1995Q4	2.985	3.776	6.333	6.707	11.587	6.73
1996Q1	3.23	4.08	6.167	6.677	10.545	6.477
1996Q2	3.314	4.193	6.5	6.887	9.868	6.49
1996Q3	3.144	4.023	6.333	7.003	9.36	6.413
1996Q4	2.719	3.696	5.9	6.527	7.83	5.813
1997Q1	2.58	3.503	5.7	5.873	7.536	5.607
1997Q2	2.601	3.29	5.8	6.057	7.374	5.7
1997Q3	2.356	3.328	5.633	5.967	6.51	5.497
1997Q4	1.958	3.306	5.5	5.657	6.022	5.543
1998Q1	1.934	3.052	5	5.3	5.336	5.033
1998Q2	1.687	3.277	4.9	5.433	5.144	4.963
1998Q3	1.429	3.088	4.4	5.437	4.762	4.573
1998Q4	1.115	2.761	4.033	5.43	4.288	4.21
1999Q1	1.948	2.57	3.867	4.893	4.082	4.043
1999Q2	1.51	2.73	4.1	5.04	4.335	4.277
1999Q3	1.78	3.213	4.867	5.937	5.117	5.097
1999Q4	1.759	3.644	5.167	6.12	5.377	5.437
2000Q1	1.769	3.936	5.433	6.277	5.687	5.667
2000Q2	1.703	4.091	5.267	6.143	5.549	5.557
2000Q3	1.772	3.923	5.267	6.247	5.594	5.593
2000Q4	1.734	3.75	5.1	6.207	5.475	5.463
2001Q1	1.364	3.439	4.767	5.973	5.165	5.107
2001Q2	1.239	3.489	4.967	6.43	5.374	5.247
2001Q3	1.331	3.325	4.867	6.5	5.273	5.113
2001Q4	1.342	3.274	4.6	6.043	4.937	4.787
2002Q1	1.447	3.612	4.98	6.403	5.251	5.113
2002Q2	1.362	3.431	5.113	6.753	5.354	5.24
2002Q3	1.227	3.067	4.613	6.31	4.852	4.72
2002Q4	1.016	2.686	4.423	6.07	4.681	4.497
2003Q1	0.796	2.436	4.043	5.417	4.24	4.08
2003Q2	0.59	2.541	3.863	4.927	4.16	3.987
2003Q3	1.261	2.773	4.09	4.94	4.333	4.167
2003Q4	1.367	2.885	4.287	4.897	4.45	4.35
2004Q1	1.32	2.722	4.063	4.317	4.276	4.097
2004Q2	1.611	2.912	4.22	4.767	4.463	4.26
2004Q3	1.596	2.844	4.113	4.33	4.323	4.133
2004Q4	1.444	2.483	3.75	4.06	3.973	3.76
2005Q1	1.351	2.328	3.6	3.897	3.742	3.563
2005Q2	1.213	2.029	3.303	3.707	3.537	3.363
2005Q3	1.37	1.944	3.167	3.557	3.391	3.18
2005Q4	1.485	2.08	3.343	3.823	3.551	3.353
2006Q1	1.635	2.307	3.477	3.737	3.721	3.497
2006Q2	1.902	2.767	3.937	4.167	4.266	3.99
2006Q3	1.741	2.553	3.88	4.21	4.171	3.92
2006Q4	1.684	2.442	3.757	4.193	4.026	3.813

Figure 3: Long-term Real Interest Rates and OECD Weighted Average

Data for Figure 3 immediately follows

Data for Figure 3

Date	Real OECD Weighted Average	US	UK	CANADA	AUSTRALIA	SPAIN	FRANCE
1980Q1	0.048213	-1.94489	NA	2.732366	-0.02215	-0.84099	0.330444
1980Q2	-0.92399	-3.45167	NA	2.015202	0.765056	0.08326	-0.10527
1980Q3	-0.33044	-1.7564	NA	1.560613	1.509781	0.747033	-0.03663
1980Q4	0.650917	-0.10364	NA	1.681246	2.829173	1.334946	0.602143
1981Q1	1.521104	1.526193	NA	0.797121	3.340928	1.470191	1.953182
1981Q2	3.120502	3.527512	NA	2.01423	4.018052	0.821308	3.303039
1981Q3	3.524456	3.603208	NA	3.351289	4.942707	0.771007	3.044944
1981Q4	3.567435	4.11028	NA	2.938402	3.351472	1.332997	2.280369
1982Q1	4.657604	6.237839	NA	3.606419	4.034659	1.446353	2.081613
1982Q2	4.95998	6.570709	NA	3.2918	4.550683	0.84207	2.099703
1982Q3	5.298332	6.900553	NA	3.960619	3.357906	1.104652	4.359576
1982Q4	4.86151	5.95818	NA	2.167362	3.127435	2.087393	5.657003
1983Q1	5.251759	6.728176	NA	3.382693	1.952604	2.227615	5.106089
1983Q2	5.623571	7.010048	NA	4.748839	2.734551	4.190896	5.118073
1983Q3	6.83324	8.875353	NA	6.051126	5.013023	5.694869	3.879982
1983Q4	6.495853	8.188816	NA	6.698665	4.527692	4.754492	3.862782
1984Q1	6.030529	6.993114	NA	6.68352	7.539511	4.545446	4.630989
1984Q2	6.831322	8.425814	NA	8.509729	9.553694	5.459807	5.643112
1984Q3	6.874437	8.218659	NA	8.971943	9.413283	4.16836	5.7718
1984Q4	6.206585	7.28629	NA	8.053678	10.42744	4.581179	5.174326
1985Q1	6.133925	7.663112	NA	7.819478	8.706532	3.420424	5.424257
1985Q2	5.770084	6.953513	NA	6.83126	6.748943	3.47129	5.147329
1985Q3	5.657771	6.757294	NA	6.353963	5.41914	5.979063	5.930521
1985Q4	5.466164	6.033826	NA	5.739202	6.069445	3.822261	6.277563
1986Q1	5.111273	5.286522	NA	5.33376	4.249463	3.054451	6.304915
1986Q2	5.492886	5.827205	NA	4.847941	3.797521	2.94811	6.039831
1986Q3	5.476641	5.546847	NA	4.508739	4.615959	1.773053	6.145983
1986Q4	5.95097	5.840139	NA	4.37954	3.453218	1.63026	7.151493
1987Q1	5.444241	5.051715	NA	4.162996	3.926869	4.34056	5.498167
1987Q2	4.821564	4.478734	NA	4.40701	3.376001	6.726164	5.365477
1987Q3	5.308876	4.525858	NA	5.388119	4.189517	8.941411	6.226999
1987Q4	5.145163	4.517286	NA	5.701692	5.590086	8.740775	6.870539
1988Q1	4.68343	4.282821	NA	5.113462	5.116831	7.40146	6.826574
1988Q2	5.005711	4.740357	NA	5.623358	4.421012	6.669064	6.429813
1988Q3	5.109405	4.760248	NA	5.840837	4.162718	5.573963	6.037499
1988Q4	4.58897	4.459233	NA	5.649165	4.259094	6.736566	5.561326
1989Q1	4.601368	4.329176	NA	5.570908	6.270944	6.650224	5.339084
1989Q2	3.843755	3.435851	NA	4.676394	5.654104	6.24229	4.974383
1989Q3	3.697404	3.248527	NA	3.883924	4.862063	6.048177	4.940353
1989Q4	3.90884	3.134392	NA	4.130064	5.122502	6.580914	5.228461
1990Q1	4.296338	3.032107	NA	4.682713	4.164088	7.133295	6.269135
1990Q2	5.002084	3.914032	NA	6.255753	5.462016	7.413545	6.382782
1990Q3	4.777814	2.972427	NA	6.352085	6.945375	7.847141	6.732882
1990Q4	4.029293	1.995179	NA	5.471974	5.438696	7.415891	6.580719
1991Q1	3.880943	2.620635	3.048479	3.113365	6.452786	7.293034	5.729551
1991Q2	3.893915	3.132095	1.871966	3.248814	7.326374	5.760731	5.51896
1991Q3	4.122891	3.936981	2.135776	3.771457	7.341469	5.640851	5.623742
1991Q4	4.24476	4.256285	2.491076	4.398253	8.18886	5.551262	5.666853
1992Q1	4.273917	4.284978	2.40085	6.723002	8.130854	4.009835	5.571763
1992Q2	4.388509	4.174876	4.732753	7.045212	7.958454	4.46757	5.690486
1992Q3	4.539653	3.436836	5.765542	6.229889	7.873391	6.233569	6.589467
1992Q4	4.774976	3.510403	5.567794	5.904034	8.549251	7.071133	6.285071
1993Q1	3.931868	3.010476	5.524362	5.474004	7.067892	7.092086	5.457545
1993Q2	3.87607	2.778105	5.397867	5.650521	5.627754	6.240916	5.019115
1993Q3	3.09857	2.722592	4.222133	5.166224	4.572044	4.728005	4.154447
1993Q4	2.965656	2.761578	4.114699	4.855041	4.629629	3.537976	3.781306
1994Q1	3.518029	3.4401	4.279756	6.269703	5.453553	3.10913	4.18828
1994Q2	4.570358	4.590896	6.170154	8.476	6.840096	4.656127	5.276407
1994Q3	5.18136	4.354045	6.983707	8.843622	7.577903	5.825988	5.997304
1994Q4	5.328031	5.100687	6.844317	9.130514	7.595747	6.571696	6.374752
1995Q1	5.201414	4.514263	6.084346	7.311201	6.075054	6.768454	6.239932
1995Q2	4.350541	3.418938	5.495813	5.232585	4.552261	6.277915	5.842272
1995Q3	4.250885	3.563634	5.094999	5.615559	3.682087	6.310019	5.476387
1995Q4	4.069745	3.183422	4.795507	5.32307	3.203431	5.841794	5.025377
1996Q1	3.996747	3.041592	4.989175	5.803049	4.47264	5.772442	4.338829
1996Q2	4.286309	3.786137	5.464641	6.243482	5.607629	5.403268	4.014426
1996Q3	4.210523	3.770121	5.417067	5.966204	5.972196	4.885774	4.423373
1996Q4	3.546539	3.014624	4.948943	4.307827	5.738718	3.928956	4.128865
1997Q1	3.638418	3.514632	5.438571	4.298951	6.244855	4.164134	4.068125
1997Q2	3.839815	4.295973	5.635305	4.829996	7.225612	5.010388	4.789761
1997Q3	3.365754	3.931193	4.981932	4.143606	6.890384	4.371289	4.213038
1997Q4	3.236961	3.940871	4.665322	4.517425	6.381506	3.825882	4.293355
1998Q1	3.30229	4.044961	4.325002	4.336981	6.029313	3.277496	4.293831
1998Q2	3.331246	3.951364	3.82214	4.305964	4.934552	2.988247	3.930433
1998Q3	3.229278	3.549691	4.016419	4.485034	4.110293	2.733619	3.873951
1998Q4	2.770757	3.097534	3.316158	3.8658	3.348334	2.77864	3.809174
1999Q1	2.994708	3.240398	2.86108	4.253445	4.021048	2.069599	3.669732
1999Q2	3.045511	3.356603	3.410277	3.656981	4.687397	2.050079	3.823895
1999Q3	3.334156	3.455676	4.170914	3.396689	4.463828	2.701472	4.445615
1999Q4	3.497854	3.430537	4.345138	3.660944	4.742831	2.631484	4.240415
2000Q1	3.227209	3.121275	4.769252	3.557984	3.998415	2.600163	4.010606
2000Q2	3.001166	2.790982	4.649441	3.480762	3.0159	2.335435	3.833964
2000Q3	2.687996	2.343172	4.463073	2.980319	0.09083	1.812721	3.437577
2000Q4	2.391146	2.052134	4.080136	2.451177	0.07356	1.36146	3.286855
2001Q1	2.052211	1.585491	3.969378	2.546276	-0.66428	1.134783	3.576421
2001Q2	2.076938	1.882776	3.518815	2.034648	-0.20371	1.222471	3.034953
2001Q3	2.395008	2.241524	3.456014	2.798835	3.207965	1.442928	3.166837
2001Q4	2.792173	2.841955	3.677922	4.106888	2.364206	2.085278	3.247513
2002Q1	3.284665	3.798745	3.449775	3.858211	3.010501	2.472769	2.856447
2002Q2	3.380917	3.733624	4.196987	4.176678	3.240019	1.947888	3.513518
2002Q3	2.660342	2.642162	3.688294	2.714559	2.367336	2.274108	2.888192
2002Q4	1.946802	1.714832	3.080629	1.22255	2.417501	0.669555	2.296802
2003Q1	1.378346	1.00829	2.809804	0.478303	1.73742	0.209932	1.689965
2003Q2	1.693291	1.453199	2.94326	1.802246	2.30821	1.160694	1.974341
2003Q3	2.099525	1.972375	3.123713	2.618528	2.75255	1.126639	2.142934
2003Q4	2.415364	2.350796	3.581893	3.026271	3.302971	1.708597	2.107659
2004Q1	2.387211	2.161008	3.47662	3.526749	3.527889	1.791134	2.268416
2004Q2	2.133203	1.732034	3.588281	2.535853	3.30946	1.160442	1.884017
2004Q3	1.979792	1.532191	3.682362	2.634861	3.175655	0.785723	1.83547
2004Q4	1.393237	0.794416	3.17728	2.12235	2.68462	0.412051	1.710128
2005Q1	1.632888	1.25729	2.822132	2.094468	3.035478	0.299932	1.905164
2005Q2	1.502674	1.206615	2.444842	2.088125	2.74493	0.19221	1.655119
2005Q3	1.016877	0.414775	1.86806	1.226366	2.10838	-0.26363	1.30916
2005Q4	1.321397	0.71369	2.131741	1.765313	2.524394	-0.1573	1.712839
2006Q1	1.302072	0.843749	2.085357	1.674652	2.222942	-0.53731	1.689332
2006Q2	1.493624	1.041645	2.263334	1.785744	1.648099	0.046275	2.03071
2006Q3	1.66821	1.490405	2.121685	2.507118	1.729646	0.345718	2.178356
2006Q4	2.217419	2.628442	1.813078	2.665665	2.323412	1.173954	2.414749

Data for Figure 3

Date	JAPAN	GERMANY	NORWAY	ITALY	BELGIUM
1980Q1	2.789053	2.632343	2.03852	-5.28849	4.952669
1980Q2	0.402464	3.48528	0.040926	-4.85259	5.285005
1980Q3	0.122951	3.938328	-1.59428	-5.1065	4.923841
1980Q4	0.690517	3.710278	-2.41474	-3.93166	4.560827
1981Q1	0.586504	4.48329	-2.64588	-1.48752	5.349283
1981Q2	3.29039	5.537537	-1.40235	0.008502	5.711275
1981Q3	4.68403	4.986705	-1.00861	2.7563	5.19768
1981Q4	4.617278	3.527242	0.248791	3.379206	5.355411
1982Q1	4.721475	3.864933	1.379423	3.043532	5.754744
1982Q2	5.495087	3.623611	1.933085	4.486032	4.004565
1982Q3	5.712508	3.299003	1.907671	2.840584	3.889287
1982Q4	5.665515	2.142853	1.529491	2.472577	3.692051
1983Q1	5.499496	1.567956	2.984178	2.541379	3.460062
1983Q2	5.483626	1.65508	3.491692	1.991981	3.898621
1983Q3	6.41868	1.984723	4.641581	3.633037	3.725409
1983Q4	5.840702	2.789488	5.195576	4.402771	4.766782
1984Q1	5.759194	2.611844	5.535126	3.771921	5.055722
1984Q2	5.166227	2.601328	5.555752	3.839731	4.911498
1984Q3	4.994272	3.592295	5.513904	4.430395	6.054467
1984Q4	3.916104	3.447693	5.389777	5.206239	6.137877
1985Q1	3.18204	3.321355	6.754161	3.678205	6.040193
1985Q2	3.812556	3.246372	6.851616	3.969961	5.704805
1985Q3	3.16872	2.70031	6.857792	4.432944	5.713417
1985Q4	4.006171	3.017756	7.026076	4.410492	5.780549
1986Q1	3.733301	3.918654	7.173241	5.650492	7.162494
1986Q2	4.819386	4.48333	6.669174	4.969488	7.097642
1986Q3	5.252361	4.883768	4.871116	5.060436	7.223712
1986Q4	6.24619	5.591999	4.197239	5.561856	7.442564
1987Q1	5.836989	4.508777	3.136928	5.376448	7.06174
1987Q2	4.046969	3.60628	3.462946	5.560137	6.360141
1987Q3	5.514195	3.204991	4.831759	5.973703	5.945352
1987Q4	4.462083	2.502137	5.352156	5.619776	6.756088
1988Q1	3.410545	2.245363	5.886765	5.160802	6.822077
1988Q2	4.391922	2.220259	5.468517	5.499584	6.818533
1988Q3	4.892722	3.29263	5.872683	5.845343	7.060723
1988Q4	3.504345	2.968754	6.039996	5.722514	6.374086
1989Q1	3.852589	3.095208	5.873432	5.628788	5.613071
1989Q2	2.395247	3.233757	5.803585	5.750311	5.235315
1989Q3	2.248026	3.945802	5.959463	6.229864	5.033484
1989Q4	2.773686	4.476033	6.404316	6.964751	5.387473
1990Q1	3.263304	4.834425	5.99978	7.069737	6.595452
1990Q2	4.254018	5.348847	6.725836	6.965375	6.681869
1990Q3	5.004069	5.230717	6.56394	6.267295	6.41715
1990Q4	3.596926	5.024633	5.887832	6.30885	5.886865
1991Q1	2.746847	5.601132	6.335302	6.999673	5.581256
1991Q2	3.144351	5.227823	6.005957	6.265231	5.789254
1991Q3	3.023011	4.287787	6.045376	6.524753	5.880017
1991Q4	3.001411	3.765537	7.015977	6.672116	6.35881
1992Q1	3.601449	3.431873	6.794564	6.547995	6.198341
1992Q2	3.384596	3.288808	6.789405	6.917956	5.981316
1992Q3	3.24816	4.4227	7.397094	8.332847	6.471483
1992Q4	3.879773	5.336497	7.383224	8.57093	5.677326
1993Q1	3.200218	3.799293	5.606204	8.184156	4.536802
1993Q2	3.869758	3.378453	4.489441	7.525465	4.553228
1993Q3	2.494989	2.417251	4.102767	5.055783	4.107457
1993Q4	2.527359	2.09787	3.765468	4.318672	4.17283
1994Q1	2.799518	2.993135	4.491739	4.396104	4.251186
1994Q2	3.306024	2.568985	6.216833	5.350275	4.819294
1994Q3	4.780668	2.212084	6.569949	7.284448	5.511409
1994Q4	3.680106	2.350237	6.537288	7.831984	6.224827
1995Q1	4.296833	2.788688	5.291961	8.031376	6.319621
1995Q2	3.322197	2.765959	4.779224	6.988052	5.926879
1995Q3	3.094583	2.801987	4.911055	5.826529	5.768685
1995Q4	3.537367	2.56802	4.443943	5.683606	5.27492
1996Q1	3.540293	1.988731	5.838575	5.105182	4.431732
1996Q2	3.348633	1.863734	5.825032	5.245891	4.477509
1996Q3	2.970422	1.805047	5.492611	5.609602	4.379374
1996Q4	2.477489	1.546925	4.689021	4.732331	3.271247
1997Q1	2.063851	1.317734	2.69842	4.918304	3.619025
1997Q2	0.564017	1.52618	3.278229	5.381276	4.109659
1997Q3	0.195481	0.897971	3.55923	4.604904	3.64803
1997Q4	-0.12802	1.380942	3.362469	3.971838	4.202873
1998Q1	-0.0791	2.25361	3.151386	3.247832	4.279732
1998Q2	1.284629	2.023614	3.162142	3.038752	3.264957
1998Q3	1.664072	2.713327	2.917861	2.667196	3.786754
1998Q4	0.583799	2.831681	3.026095	2.529395	3.513751
1999Q1	2.081457	2.779119	2.614687	2.650765	2.956876
1999Q2	1.745103	2.079362	2.598776	2.845281	3.326276
1999Q3	1.78	1.865762	3.805996	3.336814	4.138347
1999Q4	2.805665	1.877084	3.352686	3.223935	3.787641
2000Q1	2.377161	1.641926	3.338753	3.258211	3.604332
2000Q2	2.240616	2.773863	3.179405	2.983955	3.163847
2000Q3	2.407623	3.003518	2.598032	2.88719	2.506514
2000Q4	2.197906	2.989741	3.045415	2.728609	2.537394
2001Q1	1.859906	3.106481	2.305942	2.205034	2.856505
2001Q2	2.034287	2.207804	2.390387	2.252202	2.232985
2001Q3	2.19532	2.148547	3.805261	2.406921	2.523874
2001Q4	2.443633	1.941353	3.9946	2.478649	2.509857
2002Q1	2.887976	1.301036	5.253387	2.776975	2.319524
2002Q2	2.265252	2.086561	6.302635	3.012978	3.845348
2002Q3	2.03034	2.136624	4.798238	2.387231	3.411705
2002Q4	1.549943	1.992829	3.792451	1.858491	3.203696
2003Q1	1.029181	1.575185	0.764259	1.480074	2.469944
2003Q2	0.822551	1.562383	2.596826	1.421843	2.577599
2003Q3	1.462302	1.057394	3.028867	1.547735	2.434524
2003Q4	1.703633	0.833489	3.662166	1.872845	2.580438
2004Q1	1.454412	0.988508	5.711448	1.942244	2.735085
2004Q2	1.915119	0.245962	3.859283	2.087701	1.953455
2004Q3	1.730824	0.166731	3.168412	2.04378	1.923276
2004Q4	0.941685	0.105764	2.816888	1.954179	1.165563
2005Q1	1.620622	0.3183	2.792358	1.793506	0.903353
2005Q2	1.617827	0.371052	2.127996	1.659949	0.633006
2005Q3	1.978995	-0.04698	1.832703	1.338714	-0.02128
2005Q4	2.534838	-0.10364	2.017604	1.368416	0.693422
2006Q1	1.804789	0.433776	1.437224	1.544692	1.236182
2006Q2	1.731936	0.61329	1.749646	1.988111	1.943305
2006Q3	1.133427	1.356308	1.983402	1.960578	2.397725
2006Q4	1.34564	2.029864	1.650263	2.164199	2.332684

Figure 4: Long-term Nominal Bond-yield Models without Expectational Variables

Data for Figure 4 - Dynamic Forecast

Date	US	UK	SWITZ	SWEDEN	NZ	NORWAY	PORTUGAL	SPAIN	AUSTRIA	BELGIUM	CANADA	AUSTRALIA	DENMARK	FRANCE	FINLAND	GERMANY	ITALY	JAPAN	NETHERLAND
1998Q1	5.96	6.40	3.36	6.36	7.17	5.68	6.15	5.79	5.61	5.80	5.95	6.09	6.18	5.44	5.59	5.54	6.38	1.88	5.60
1998Q2	5.98	6.44	3.46	6.65	7.68	5.68	6.38	5.74	5.71	5.80	6.25	6.03	6.30	5.41	5.52	5.61	6.93	1.85	5.64
1998Q3	5.93	6.44	3.54	7.00	7.86	5.94	6.55	5.71	5.77	5.79	6.45	6.05	6.41	5.35	5.39	5.57	7.35	1.86	5.55
1998Q4	5.85	6.28	3.52	7.25	7.66	6.31	6.42	5.50	5.79	5.35	6.62	6.13	6.51	5.28	5.23	5.51	7.36	1.85	5.43
1999Q1	5.78	5.96	3.44	7.47	7.46	6.60	7.18	5.46	5.76	5.26	6.71	6.12	6.48	5.28	5.01	5.43	7.01	1.88	5.49
1999Q2	5.79	5.62	3.37	7.58	7.39	6.71	7.58	5.53	5.67	5.54	6.81	6.11	6.56	5.24	4.78	5.34	6.55	1.97	5.52
1999Q3	5.83	5.46	3.36	7.68	7.32	6.69	8.20	5.68	5.63	5.79	6.89	6.02	6.68	5.23	4.63	5.25	6.23	2.03	5.54
1999Q4	5.98	5.59	3.49	7.83	7.34	6.60	8.31	5.97	5.64	6.55	7.00	5.95	7.00	5.40	4.80	5.85	6.26	2.12	5.68
2000Q1	6.06	6.15	3.74	7.96	7.33	6.39	7.68	6.24	5.78	7.00	7.07	5.99	7.34	5.58	5.11	6.51	6.52	2.30	5.81
2000Q2	6.30	6.35	4.05	8.13	7.42	6.08	7.25	6.47	6.01	7.24	7.19	6.15	7.67	5.79	5.48	7.01	6.94	2.44	5.89
2000Q3	6.43	6.24	4.25	8.23	7.58	5.82	7.47	6.68	6.26	7.32	7.32	6.47	7.87	6.01	5.86	7.08	7.38	2.58	6.00
2000Q4	6.42	6.04	4.36	8.16	7.74	5.62	7.76	6.90	6.49	7.39	7.30	6.62	7.88	6.21	6.18	6.84	7.74	2.70	6.24
2001Q1	6.24	5.85	4.40	8.05	7.88	5.56	7.77	7.00	6.62	7.24	7.62	6.74	7.72	6.32	6.33	6.50	7.92	2.73	6.74
2001Q2	5.87	5.79	4.38	7.86	7.88	5.60	7.94	7.02	6.65	7.13	7.74	6.76	7.58	6.38	6.36	6.14	7.93	2.69	7.21
2001Q3	5.56	5.77	4.20	7.61	7.80	5.57	7.55	6.95	6.56	6.96	7.55	6.67	7.43	6.35	6.29	5.89	7.77	2.60	7.49
2001Q4	5.05	5.57	3.94	7.39	7.61	5.51	7.16	6.63	6.35	6.62	7.09	6.64	7.12	6.13	6.04	5.57	7.38	2.48	7.51
2002Q1	4.74	5.37	3.71	7.24	7.44	5.26	6.70	6.22	6.12	6.43	6.24	6.59	6.98	5.86	5.79	5.25	6.99	2.41	7.41
2002Q2	4.60	5.31	3.55	7.31	7.39	5.14	6.29	5.97	5.94	6.28	5.71	6.56	6.92	5.60	5.57	5.15	6.74	2.41	7.26
2002Q3	4.56	5.35	3.43	7.41	7.36	5.02	5.71	5.73	5.81	6.22	5.61	6.54	6.87	5.38	5.40	5.25	6.66	2.47	7.20
2002Q4	4.58	5.56	3.36	7.41	7.32	4.90	4.96	5.71	5.75	6.23	5.71	6.46	6.85	5.19	5.23	5.22	6.70	2.54	7.00
2003Q1	4.58	5.83	3.27	7.43	7.23	4.77	4.35	5.73	5.69	6.21	5.78	6.38	6.92	4.99	5.05	5.03	6.73	2.57	6.87
2003Q2	4.55	5.78	3.16	7.32	7.10	4.35	3.63	5.59	5.57	6.09	5.72	6.23	6.73	4.73	4.84	4.77	6.67	2.58	6.69
2003Q3	4.64	5.75	3.09	7.23	6.95	3.87	3.17	5.41	5.45	5.98	5.53	6.13	6.39	4.49	4.64	4.59	6.56	2.58	6.47
2003Q4	4.74	5.91	3.08	7.15	6.88	3.38	3.00	5.22	5.35	5.92	5.35	6.16	6.05	4.35	4.50	4.67	6.44	2.64	6.29
2004Q1	4.86	6.16	3.12	7.18	6.90	2.97	3.01	5.08	5.26	6.04	5.15	6.22	5.64	4.28	4.38	4.93	6.32	2.73	6.01
2004Q2	4.98	6.49	3.22	7.25	7.00	2.74	3.22	5.11	5.28	6.24	5.12	6.30	5.40	4.32	4.30	5.15	6.27	2.74	5.88
2004Q3	5.10	6.50	3.31	7.30	7.17	2.57	3.22	5.22	5.35	6.43	5.17	6.31	5.29	4.38	4.29	5.19	6.25	2.75	5.66
2004Q4	5.26	6.35	3.39	7.32	7.35	2.49	3.15	5.33	5.47	6.61	5.28	6.25	5.29	4.44	4.33	5.10	6.22	2.68	5.49
2005Q1	5.40	6.25	3.44	7.15	7.46	2.31	2.95	5.38	5.56	6.65	5.33	6.17	5.18	4.48	4.37	5.05	6.18	2.65	5.25
2005Q2	5.52	5.92	3.45	7.08	7.53	2.27	2.87	5.36	5.61	6.69	5.31	6.17	5.35	4.49	4.40	4.95	6.14	2.67	5.06
2005Q3	5.81	6.03	3.47	7.09	7.58	2.23	2.96	5.34	5.63	6.74	5.34	6.17	5.68	4.52	4.39	4.93	6.14	2.71	4.94
2005Q4	5.92	6.20	3.51	7.06	7.64	2.20	3.16	5.33	5.59	6.77	5.42	6.16	5.87	4.52	4.38	4.92	6.22	2.78	4.81
2006Q1	6.04	6.21	3.58	7.25	7.72	2.25	3.44	5.42	5.55	6.87	5.60	6.15	6.09	4.57	4.41	5.05	6.37	2.71	4.75
2006Q2	6.18	6.34	3.66	7.39	7.84	2.18	3.72	5.53	5.57	6.98	5.81	6.15	6.19	4.68	4.51	5.27	6.55	2.58	4.73
2006Q3	6.25	6.54	3.73	7.49	7.92	2.15	3.92	5.62	5.61	7.30	5.89	6.21	6.26	4.80	4.69	5.63	6.73	2.43	4.73
2006Q4	6.17	6.79	3.77	7.60	7.95	2.15	3.99	5.62	5.68	7.25	5.85	6.26	6.34	4.91	4.90	5.97	6.87	2.36	4.69

Data for Figure 4 - 95% Confidence Interval - Upper Range

Date	US	UK	SWITZ	SWEDEN	NZ	NORWAY	PORTUGAL	SPAIN	AUSTRIA	BELGIUM	CANADA	AUSTRALIA	DENMARK	FRANCE	FINLAND	GERMANY	ITALY	JAPAN	NETHERLAND
1998Q1	7.02	7.23	3.86	7.38	8.49	6.58	8.64	7.24	6.15	6.54	7.14	7.34	7.57	6.37	6.67	6.19	7.81	2.92	6.30
1998Q2	7.32	7.43	4.16	8.31	9.47	7.02	9.59	7.94	6.51	6.91	7.77	7.79	8.25	6.73	7.19	6.47	9.14	3.21	6.54
1998Q3	7.38	7.45	4.33	9.09	9.88	7.51	10.08	8.25	6.70	7.10	8.06	8.11	8.58	6.88	7.36	6.51	9.90	3.43	6.51
1998Q4	7.34	7.26	4.35	9.58	9.77	8.00	10.14	8.15	6.77	6.82	8.26	8.38	8.73	6.91	7.32	6.51	9.99	3.56	6.39
1999Q1	7.28	6.90	4.28	9.95	9.64	8.35	10.96	8.19	6.75	6.77	8.35	8.50	8.73	6.96	7.15	6.46	9.64	3.69	6.45
1999Q2	7.28	6.56	4.20	10.13	9.61	8.48	11.37	8.36	6.67	7.03	8.46	8.56	8.83	6.96	6.94	6.33	9.20	3.84	6.49
1999Q3	7.32	6.40	4.19	10.25	9.59	8.46	12.04	8.60	6.63	7.26	8.57	8.53	8.97	6.97	6.81	6.20	8.91	3.94	6.52
1999Q4	7.46	6.55	4.32	10.39	9.64	8.36	12.14	8.92	6.64	8.05	8.68	8.50	9.29	7.14	6.98	6.84	8.95	4.06	6.65
2000Q1	7.56	7.21	4.58	10.50	9.63	8.15	11.54	9.20	6.79	8.50	8.75	8.56	9.63	7.32	7.28	7.51	9.24	4.28	6.76
2000Q2	7.79	7.39	4.89	10.65	9.69	7.86	11.12	9.37	7.02	8.68	8.87	8.72	9.95	7.52	7.66	8.00	9.68	4.45	6.84
2000Q3	7.93	7.21	5.09	10.74	9.82	7.64	11.29	9.50	7.27	8.71	8.99	9.02	10.13	7.73	8.04	8.03	10.11	4.60	6.95
2000Q4	7.92	6.98	5.20	10.66	9.99	7.47	11.54	9.65	7.49	8.74	8.97	9.16	10.13	7.92	8.35	7.71	10.44	4.74	7.20
2001Q1	7.75	6.79	5.24	10.54	10.10	7.42	11.57	9.69	7.62	8.56	9.36	9.27	9.95	8.02	8.47	7.39	10.59	4.76	7.72
2001Q2	7.38	6.72	5.21	10.33	10.11	7.46	11.74	9.68	7.65	8.45	9.52	9.27	9.80	8.08	8.46	7.18	10.59	4.71	8.22
2001Q3	7.03	6.70	5.03	10.06	10.00	7.43	11.43	9.60	7.56	8.27	9.32	9.18	9.65	8.04	8.38	7.13	10.40	4.61	8.51
2001Q4	6.52	6.51	4.78	9.83	9.78	7.36	11.09	9.29	7.34	7.95	8.90	9.16	9.35	7.82	8.13	7.01	10.01	4.49	8.54
2002Q1	6.21	6.34	4.55	9.68	9.64	7.13	10.66	8.88	7.11	7.77	8.02	9.11	9.22	7.56	7.89	6.82	9.64	4.43	8.45
2002Q2	6.06	6.26	4.39	9.76	9.59	7.01	10.28	8.60	6.94	7.62	7.43	9.10	9.15	7.31	7.67	6.86	9.39	4.43	8.29
2002Q3	6.02	6.29	4.26	9.88	9.56	6.90	9.81	8.37	6.81	7.56	7.29	9.09	9.10	7.09	7.50	7.07	9.30	4.52	8.22
2002Q4	6.06	6.54	4.20	9.90	9.53	6.80	9.26	8.36	6.75	7.58	7.35	9.02	9.10	6.91	7.34	7.06	9.38	4.61	8.03
2003Q1	6.07	6.86	4.10	9.93	9.43	6.71	8.77	8.43	6.69	7.58	7.41	8.94	9.18	6.71	7.17	6.79	9.45	4.64	7.91
2003Q2	6.04	6.80	4.00	9.82	9.26	6.33	8.16	8.32	6.57	7.49	7.35	8.79	9.01	6.46	6.98	6.47	9.44	4.65	7.75
2003Q3	6.15	6.76	3.92	9.74	9.09	5.87	7.67	8.17	6.45	7.40	7.17	8.69	8.67	6.23	6.80	6.28	9.36	4.65	7.53
2003Q4	6.26	6.93	3.91	9.67	9.00	5.38	7.38	7.98	6.35	7.35	6.99	8.73	8.33	6.09	6.68	6.35	9.25	4.70	7.35
2004Q1	6.38	7.19	3.96	9.72	9.06	4.94	7.26	7.85	6.27	7.46	6.78	8.79	7.91	6.02	6.58	6.59	9.13	4.79	7.03
2004Q2	6.50	7.57	4.06	9.82	9.23	4.69	7.34	7.90	6.29	7.65	6.75	8.89	7.67	6.06	6.52	6.72	9.07	4.80	6.89
2004Q3	6.62	7.54	4.15	9.88	9.44	4.51	7.32	8.05	6.36	7.85	6.81	8.90	7.57	6.11	6.53	6.63	9.06	4.80	6.65
2004Q4	6.77	7.34	4.22	9.91	9.63	4.44	7.26	8.18	6.48	8.02	6.92	8.83	7.57	6.17	6.57	6.44	9.02	4.72	6.47
2005Q1	6.89	7.23	4.27	9.74	9.71	4.27	7.10	8.22	6.58	8.07	6.97	8.75	7.48	6.21	6.61	6.32	8.96	4.68	6.23
2005Q2	6.99	6.89	4.28	9.66	9.74	4.25	7.01	8.17	6.63	8.11	6.95	8.75	7.67	6.22	6.64	6.18	8.91	4.70	6.04
2005Q3	7.28	7.01	4.31	9.67	9.79	4.23	7.07	8.13	6.65	8.18	6.97	8.75	8.02	6.25	6.63	6.13	8.91	4.75	5.93
2005Q4	7.38	7.24	4.34	9.65	9.83	4.22	7.23	8.12	6.60	8.23	7.05	8.75	8.22	6.25	6.62	6.08	9.00	4.82	5.80
2006Q1	7.47	7.24	4.41	9.84	9.90	4.29	7.48	8.21	6.56	8.33	7.24	8.75	8.44	6.30	6.65	6.15	9.14	4.74	5.72
2006Q2	7.61	7.39	4.49	9.97	10.02	4.25	7.76	8.32	6.58	8.45	7.44	8.76	8.52	6.40	6.74	6.30	9.32	4.61	5.70
2006Q3	7.68	7.59	4.56	10.06	10.11	4.24	7.95	8.39	6.62	8.77	7.52	8.81	8.56	6.52	6.93	6.64	9.47	4.46	5.70
2006Q4	7.62	7.88	4.60	10.16	10.12	4.25	8.04	8.37	6.69	8.72	7.49	8.86	8.61	6.63	7.13	7.00	9.58	4.40	5.66

Data for Figure 4 - 95% Confidence Interval - Lower Range

Date	US	UK	SWITZ	SWEDEN	NZ	NORWAY	PORTUGAL	SPAIN	AUSTRIA	BELGIUM	CANADA	AUSTRALIA	DENMARK	FRANCE	FINLAND	GERMANY	ITALY	JAPAN	NETHERLAND
1998Q1	4.90	5.58	2.86	5.33	5.86	4.78	3.66	4.33	5.07	5.06	4.76	4.85	4.79	4.52	4.50	4.89	4.95	0.85	4.89
1998Q2	4.63	5.45	2.75	4.99	5.88	4.34	3.16	3.54	4.92	4.68	4.74	4.26	4.35	4.09	3.85	4.74	4.71	0.49	4.74
1998Q3	4.47	5.43	2.74	4.92	5.85	4.37	3.02	3.17	4.85	4.49	4.83	3.99	4.25	3.83	3.42	4.63	4.79	0.29	4.59
1998Q4	4.37	5.30	2.70	4.91	5.56	4.62	2.71	2.85	4.82	3.89	4.99	3.88	4.28	3.66	3.13	4.51	4.74	0.14	4.46
1999Q1	4.29	5.02	2.61	4.99	5.29	4.84	3.41	2.74	4.76	3.76	5.07	3.75	4.23	3.60	2.87	4.40	4.39	0.07	4.52
1999Q2	4.30	4.69	2.53	5.04	5.18	4.93	3.80	2.71	4.67	4.05	5.16	3.65	4.28	3.53	2.62	4.35	3.90	0.10	4.54
1999Q3	4.34	4.52	2.53	5.11	5.05	4.92	4.35	2.76	4.62	4.32	5.21	3.50	4.39	3.50	2.46	4.30	3.55	0.12	4.56
1999Q4	4.50	4.63	2.66	5.27	5.03	4.85	4.48	3.01	4.63	5.04	5.32	3.39	4.72	3.65	2.63	4.87	3.57	0.17	4.71
2000Q1	4.56	5.09	2.91	5.42	5.03	4.63	3.83	3.29	4.78	5.51	5.39	3.42	5.06	3.84	2.94	5.52	3.81	0.31	4.85
2000Q2	4.80	5.30	3.21	5.61	5.16	4.30	3.38	3.57	5.01	5.80	5.51	3.58	5.39	4.07	3.30	6.01	4.21	0.43	4.94
2000Q3	4.93	5.27	3.41	5.72	5.34	4.00	3.66	3.87	5.26	5.94	5.64	3.91	5.61	4.30	3.68	6.12	4.66	0.55	5.05
2000Q4	4.92	5.11	3.52	5.67	5.49	3.78	3.99	4.15	5.48	6.04	5.63	4.08	5.64	4.50	4.01	5.98	5.04	0.67	5.28
2001Q1	4.74	4.91	3.57	5.57	5.65	3.70	3.96	4.30	5.62	5.91	5.88	4.21	5.49	4.62	4.18	5.62	5.25	0.70	5.76
2001Q2	4.37	4.85	3.55	5.40	5.66	3.74	4.14	4.36	5.65	5.82	5.97	4.24	5.35	4.69	4.25	5.10	5.28	0.67	6.20
2001Q3	4.08	4.84	3.36	5.16	5.59	3.72	3.66	4.29	5.57	5.64	5.78	4.15	5.21	4.66	4.19	4.64	5.13	0.58	6.48
2001Q4	3.58	4.63	3.11	4.95	5.43	3.65	3.24	3.97	5.35	5.30	5.28	4.13	4.90	4.43	3.95	4.12	4.74	0.47	6.49
2002Q1	3.28	4.40	2.87	4.81	5.25	3.40	2.75	3.57	5.12	5.09	4.46	4.06	4.75	4.16	3.69	3.67	4.35	0.39	6.38
2002Q2	3.14	4.36	2.71	4.86	5.19	3.27	2.30	3.33	4.95	4.93	3.99	4.03	4.69	3.90	3.47	3.44	4.10	0.38	6.23
2002Q3	3.09	4.40	2.60	4.94	5.15	3.15	1.62	3.10	4.82	4.88	3.94	4.00	4.63	3.67	3.30	3.43	4.01	0.42	6.17
2002Q4	3.11	4.59	2.53	4.93	5.11	3.00	0.66	3.06	4.76	4.88	4.07	3.91	4.60	3.48	3.12	3.38	4.03	0.48	5.97
2003Q1	3.09	4.81	2.43	4.94	5.03	2.84	-0.07	3.03	4.69	4.83	4.14	3.82	4.66	3.26	2.93	3.27	4.01	0.50	5.83
2003Q2	3.05	4.77	2.32	4.82	4.93	2.37	-0.91	2.85	4.56	4.68	4.09	3.66	4.45	2.99	2.71	3.08	3.90	0.51	5.63
2003Q3	3.12	4.74	2.25	4.71	4.82	1.88	-1.34	2.65	4.45	4.55	3.90	3.56	4.10	2.74	2.48	2.90	3.76	0.51	5.40
2003Q4	3.22	4.89	2.24	4.62	4.75	1.39	-1.38	2.45	4.34	4.49	3.72	3.59	3.78	2.60	2.32	2.98	3.63	0.58	5.23
2004Q1	3.34	5.12	2.28	4.63	4.74	1.00	-1.23	2.31	4.26	4.62	3.51	3.64	3.36	2.54	2.18	3.27	3.51	0.66	4.98
2004Q2	3.46	5.42	2.39	4.68	4.77	0.78	-0.91	2.31	4.27	4.82	3.48	3.72	3.13	2.58	2.08	3.58	3.46	0.69	4.87
2004Q3	3.58	5.46	2.48	4.71	4.90	0.63	-0.88	2.39	4.34	5.02	3.53	3.72	3.02	2.64	2.06	3.74	3.44	0.70	4.67
2004Q4	3.75	5.36	2.55	4.73	5.06	0.55	-0.96	2.48	4.46	5.19	3.65	3.66	3.01	2.70	2.09	3.76	3.43	0.65	4.51
2005Q1	3.90	5.28	2.60	4.56	5.22	0.34	-1.20	2.54	4.54	5.23	3.70	3.59	2.88	2.75	2.13	3.77	3.40	0.61	4.26
2005Q2	4.05	4.95	2.61	4.49	5.31	0.29	-1.26	2.54	4.60	5.26	3.67	3.59	3.03	2.76	2.16	3.73	3.36	0.64	4.07
2005Q3	4.33	5.04	2.64	4.50	5.38	0.23	-1.15	2.54	4.62	5.30	3.70	3.59	3.33	2.79	2.15	3.74	3.36	0.68	3.96
2005Q4	4.46	5.16	2.67	4.48	5.45	0.18	-0.91	2.54	4.58	5.32	3.78	3.56	3.51	2.79	2.14	3.76	3.44	0.73	3.82
2006Q1	4.60	5.18	2.75	4.66	5.54	0.22	-0.60	2.64	4.54	5.41	3.97	3.54	3.73	2.85	2.17	3.95	3.59	0.67	3.77
2006Q2	4.75	5.29	2.83	4.80	5.65	0.12	-0.32	2.75	4.56	5.51	4.18	3.54	3.85	2.95	2.27	4.23	3.79	0.55	3.76
2006Q3	4.82	5.49	2.90	4.92	5.73	0.07	-0.11	2.85	4.61	5.84	4.25	3.61	3.96	3.07	2.46	4.63	3.99	0.40	3.76
2006Q4	4.72	5.71	2.94	5.05	5.77	0.05	-0.06	2.87	4.68	5.78	4.22	3.67	4.07	3.19	2.68	4.95	4.17	0.32	3.72

Data for Figure 4 - Long-term nominal interest rates

Date	SWEDEN	NZ	PORTUGAL	AUSTRIA	DENMARK	FINLAND	NETHERLAND	US	UK	CANADA	AUSTRALIA	SPAIN	FRANCE	JAPAN	SWITZ	GERMANY	NORWAY	ITALY	BELGIUM
1971Q1	7.55	5.51	6.92	7.75	11.33	7.70	7.56	6.02	8.58	6.77	6.85	9.87	8.38	7.05	5.51	7.93	6.37	7.06	7.50
1971Q2	7.54	5.51	7.00	7.77	11.80	7.57	7.50	6.25	8.15	7.09	6.83	9.56	8.45	7.05	5.32	8.13	6.38	6.99	7.35
1971Q3	7.48	5.52	7.00	7.66	11.26	8.68	7.68	6.48	7.62	7.25	6.80	9.93	8.46	7.05	5.29	8.47	6.41	7.12	7.25
1971Q4	7.38	5.52	7.00	7.65	11.11	8.62	7.76	5.89	7.13	6.67	6.37	9.67	8.40	7.07	4.94	8.20	6.41	6.82	7.18
1972Q1	7.49	5.53	7.00	7.64	11.75	7.97	7.37	6.03	7.16	6.87	5.94	9.35	8.27	7.08	4.71	7.80	6.39	6.67	7.01
1972Q2	7.52	5.52	7.00	7.38	11.50	7.94	7.48	6.14	8.08	7.35	5.85	8.87	7.88	7.01	4.98	8.17	6.31	6.47	7.07
1972Q3	7.57	5.51	7.00	7.14	11.33	8.10	7.25	6.29	9.08	7.47	5.77	9.20	7.83	6.71	4.95	8.33	6.23	6.54	6.95
1972Q4	7.60	5.53	7.00	7.37	11.15	7.85	7.32	6.37	9.18	7.21	5.77	8.99	8.07	6.72	5.21	8.57	6.14	6.68	7.15
1973Q1	7.61	5.54	7.25	7.91	12.19	8.17	7.38	6.60	9.43	7.20	5.75	9.03	8.41	6.77	5.32	8.72	6.16	6.78	7.31
1973Q2	7.64	5.59	7.25	7.96	12.34	8.25	7.55	6.81	9.76	7.56	6.35	9.13	8.73	7.04	5.38	9.42	6.19	6.80	7.28
1973Q3	7.66	6.01	7.25	8.33	13.51	8.35	8.29	7.21	11.04	7.79	7.28	9.24	9.30	7.22	5.60	9.88	6.20	6.99	7.59
1973Q4	7.64	6.05	7.25	8.80	14.14	8.27	8.45	6.75	12.00	7.56	8.35	9.54	9.55	7.51	6.07	9.72	6.21	7.11	7.79
1974Q1	7.49	6.05	7.75	8.97	15.49	8.85	9.32	7.05	13.32	7.80	8.36	10.33	10.46	8.03	6.69	10.08	6.23	7.37	8.24
1974Q2	8.06	6.08	7.75	9.81	17.73	8.78	10.05	7.54	13.65	8.91	8.78	10.76	10.98	8.05	7.27	10.72	7.43	8.86	8.78
1974Q3	8.20	6.10	8.92	10.16	17.36	9.06	10.44	7.96	14.29	9.72	9.50	11.26	11.39	8.25	7.33	10.92	7.44	10.68	9.07
1974Q4	8.40	6.11	9.50	10.02	15.25	8.48	9.49	7.67	15.56	9.06	9.50	11.61	11.17	8.42	7.23	10.52	7.28	11.54	8.98
1975Q1	8.43	6.11	10.50	9.88	13.50	9.53	8.86	7.54	13.55	8.29	9.47	11.77	10.64	8.43	6.76	9.18	7.32	10.57	8.91
1975Q2	9.01	6.10	10.50	9.63	13.43	9.57	8.59	8.05	12.84	8.78	9.50	11.71	10.29	8.44	6.71	8.72	7.27	10.14	8.19
1975Q3	9.33	6.45	10.50	9.54	12.93	9.69	8.89	8.30	12.76	9.39	10.00	11.45	10.14	8.45	6.28	8.62	7.28	9.98	8.37
1975Q4	9.39	6.64	10.50	9.38	12.97	9.71	8.82	8.06	13.58	9.51	10.00	11.32	10.17	8.54	5.99	8.68	7.29	9.47	8.58
1976Q1	9.39	7.48	10.75	9.17	14.19	9.83	8.35	7.75	12.44	9.38	10.00	11.02	10.20	8.57	5.28	8.25	7.31	10.19	8.92
1976Q2	9.41	8.60	10.75	8.74	15.34	10.37	8.81	7.77	12.76	9.33	10.00	10.83	10.27	8.58	5.17	8.22	7.28	12.83	9.16
1976Q3	9.47	8.58	11.25	8.55	16.06	10.04	9.82	7.73	13.80	9.27	9.99	10.86	10.59	8.59	4.99	8.38	7.19	13.21	9.04
1976Q4	10.02	8.71	11.25	8.55	16.43	10.42	8.83	7.19	15.43	8.94	10.12	10.27	10.98	8.61	4.49	7.78	7.23	14.40	9.23
1977Q1	9.89	8.70	11.75	8.52	16.67	10.98	8.36	7.35	13.28	8.61	10.40	10.16	10.75	8.58	3.99	7.25	7.27	14.99	9.13
1977Q2	9.99	8.65	12.75	8.59	16.28	10.90	8.13	7.37	12.19	8.78	10.41	10.18	11.14	7.65	4.29	6.68	7.31	15.32	8.83
1977Q3	10.02	9.52	14.17	8.80	17.13	10.82	7.82	7.36	12.06	8.65	10.35	10.15	11.01	6.95	4.08	6.38	7.30	14.84	8.57
1977Q4	10.08	10.08	17.00	9.02	17.56	10.30	8.09	7.60	10.58	8.73	9.87	10.82	11.06	6.68	3.82	6.28	7.67	13.70	8.52
1978Q1	10.19	9.99	17.53	8.79	17.84	10.54	7.58	8.01	10.73	9.08	9.29	11.84	11.23	6.38	3.53	5.92	8.43	13.24	9.17
1978Q2	10.48	9.99	18.40	8.23	18.24	9.87	7.34	8.32	12.22	9.21	9.13	12.07	10.70	6.21	3.42	5.98	8.59	13.04	8.73
1978Q3	10.38	9.92	19.97	7.87	17.71	9.55	7.75	8.49	12.33	9.16	9.04	11.31	10.42	6.52	3.31	6.42	8.44	12.99	8.83
1978Q4	10.33	10.02	20.07	7.96	18.76	9.23	8.27	8.82	12.98	9.49	8.85	12.54	10.10	6.36	3.04	6.68	8.32	12.94	8.98
1979Q1	10.38	10.06	20.33	7.58	17.70	9.48	8.39	9.11	13.21	9.89	8.98	12.68	9.70	7.15	3.14	7.15	8.25	12.73	9.10
1979Q2	10.45	12.74	20.10	7.84	17.51	9.54	8.79	9.11	11.90	9.75	9.70	13.09	10.10	8.53	3.28	7.82	8.32	12.73	9.22
1979Q3	10.70	12.37	19.97	8.19	18.43	9.49	8.83	9.10	12.39	10.02	10.07	13.06	11.49	8.55	3.50	7.82	8.29	13.03	9.84
1979Q4	11.34	12.98	19.67	8.24	18.67	9.49	9.10	10.45	14.29	11.06	10.08	14.41	12.09	9.10	3.89	8.02	9.50	13.60	10.61
1980Q1	11.39	13.49	19.87	8.57	19.87	10.20	10.41	11.99	14.69	12.51	10.63	15.54	13.69	9.29	4.77	8.72	10.15	14.26	11.59
1980Q2	11.59	13.47	19.83	9.35	20.36	10.52	10.18	10.48	14.10	11.75	11.70	15.65	13.59	8.92	4.84	8.82	10.24	15.04	11.97
1980Q3	12.08	13.21	19.83	9.48	20.05	10.50	9.86	10.95	13.42	12.19	11.80	16.11	13.58	8.58	4.78	8.05	10.45	15.58	11.77
1980Q4	12.92	12.97	20.07	9.89	19.23	10.47	10.38	12.42	13.44	12.91	12.26	16.55	14.27	8.70	4.67	8.68	10.39	16.13	12.27
1981Q1	13.48	12.89	19.87	9.93	18.96	10.96	10.92	12.96	13.82	13.16	13.06	16.22	14.87	8.08	5.15	9.75	11.59	16.58	12.96
1981Q2	13.81	12.87	20.13	10.44	20.02	10.98	11.54	13.75	14.25	14.78	13.09	15.79	16.51	8.16	5.65	10.45	12.45	18.92	13.38
1981Q3	13.98	12.90	20.80	11.17	21.10	10.99	12.00	14.85	15.44	16.45	14.39	15.27	17.07	8.82	5.83	10.72	12.63	20.71	13.71
1981Q4	13.69	12.68	21.77	10.89	20.05	11.01	11.75	14.09	16.02	15.56	15.00	15.97	16.71	8.45	5.65	10.05	12.57	21.21	13.70
1982Q1	13.05	12.85	21.77	10.66	21.11	11.19	10.86	14.29	15.01	15.48	15.06	15.80	16.35	7.95	5.27	9.75	13.33	20.58	13.81
1982Q2	13.12	12.96	23.43	10.11	21.88	11.02	10.28	13.93	13.95	15.20	15.80	16.00	16.13	8.26	4.89	9.08	13.14	20.65	13.63
1982Q3	13.48	12.88	23.63	9.91	21.64	10.84	10.24	13.12	12.36	15.02	16.25	16.06	15.84	8.65	4.39	9.12	13.16	20.04	13.33
1982Q4	13.53	12.89	23.80	9.01	20.36	10.90	9.01	10.67	11.02	12.05	14.52	16.09	15.67	8.29	3.85	8.28	13.18	19.59	12.94
1983Q1	13.07	12.80	22.43	8.25	16.78	10.62	8.07	10.56	11.68	11.33	13.57	15.68	14.85	7.77	3.95	7.85	13.11	19.09	12.44
1983Q2	12.43	13.85	27.00	8.10	14.14	10.67	8.84	10.54	11.07	10.94	14.17	16.71	14.54	7.92	4.17	7.98	12.93	18.30	11.80
1983Q3	12.22	11.52	27.87	8.27	14.90	10.67	8.97	11.63	11.50	11.71	14.69	17.44	14.01	7.97	4.35	8.48	12.75	18.11	11.59
1983Q4	12.51	10.56	28.90	8.08	14.18	11.08	8.56	11.69	10.82	11.62	13.54	17.81	14.08	7.58	4.22	8.45	12.65	17.70	11.93
1984Q1	12.23	10.94	29.20	7.91	13.52	11.14	8.51	11.94	10.77	12.14	13.83	17.11	13.87	7.38	4.36	8.35	12.50	16.31	12.42
1984Q2	11.93	9.17	29.07	8.00	14.81	11.22	8.55	13.20	11.27	13.51	13.91	17.41	13.87	7.62	4.55	8.32	12.44	15.68	12.39
1984Q3	12.86	13.53	30.40	8.09	14.92	11.08	8.48	12.87	11.57	13.14	13.17	16.75	13.51	7.61	4.65	8.18	12.02	15.37	12.20
1984Q4	13.11	16.80	30.30	8.07	14.46	11.02	7.77	11.74	10.90	12.05	13.29	14.82	12.36	6.66	4.66	7.52	11.68	15.04	11.96
1985Q1	13.12	17.29	30.40	8.02	13.55	10.72	7.76	11.58	11.39	11.81	13.54	13.29	12.21	6.77	4.83	7.65	12.68	13.36	11.74
1985Q2	13.44	17.89	30.10	7.99	11.83	10.60	7.53	10.81	11.11	11.05	13.77	13.59	11.94	6.70	4.76	7.35	12.89	13.79	11.29
1985Q3	13.37	17.80	28.50	7.56	10.63	10.60	7.02	10.34	10.71	10.66	13.54	14.25	11.93	6.19	4.71	6.82	13.00	13.99	10.74
1985Q4	13.02	17.64	27.13	7.51	10.30	10.68	7.00	9.76	10.66	10.14	14.75	12.34	11.38	6.29	4.50	6.82	13.08	13.71	10.10
1986Q1	11.92	18.11	24.87	7.64	9.61	9.49	6.70	8.56	10.52	9.80	13.89	12.31	10.06	5.19	4.28	6.45	13.45	13.55	9.84
1986Q2	10.15	16.12	23.40	7.24	9.11	8.76	6.26	7.60	9.18	8.97	12.58	11.46	8.60	5.12	4.36	6.12	13.11	11.34	8.45
1986Q3	9.88	15.88	20.73	7.12	10.48	8.63	6.09	7.31	9.85	8.90	13.86	11.38	8.37	4.88	4.21	6.15	13.30	10.77	8.06
1986Q4	10.18	15.68	20.70	7.31	11.00	8.78	6.22	7.26	10.99	8.91	13.56	10.27	9.45	5.40	4.07	6.42	13.33	10.22	8.15
1987Q1	11.46	16.40	20.07	7.08	11.43	7.83	6.18	7.19	9.78	8.36	13.71	10.76	8.92	4.80	3.99	6.18	13.45	9.88	8.19
1987Q2	11.57	15.73	19.07	6.74	11.11	7.82	6.15	8.34	8.96	9.25	12.95	12.89	8.93	4.12	4.04	5.95	13.42	10.23	8.06
1987Q3	11.92	15.63	19.23	6.84	11.14	7.85	6.64	8.88	9.88	10.13	12.78	13.92	9.80	5.96	4.12	6.62	13.16	11.17	8.07
1987Q4	11.77	15.06	18.43	7.09	11.45	8.14	6.64	9.12	9.67	10.15	13.13	13.69	10.25	5.20	3.98	6.68	13.19	11.29	8.42
1988Q1	11.43	13.61	17.80	6.78	10.20	10.14	6.23	8.42	9.48	9.45	12.35	12.20	9.41	4.29	3.93	6.45	13.32	10.57	7.87
1988Q2	11.40	12.85	17.10	6.62	10.23	10.20	6.39	8.91	9.37	9.79	11.88	11.08	9.13	4.65	3.92	6.58	13.02	10.80	7.89
1988Q3	11.46	12.73	16.73	6.70	9.72	10.64	6.66	9.10	9.95	10.10	11.85	11.21	9.05	5.52	4.16	6.82	12.83	11.11	8.18
1988Q4	11.11	13.27	16.87	6.58	9.38	11.26	6.38	8.96	9.90	10.00	12.19	12.49	8.73	4.71	4.07	6.55	12.41	11.11	8.09
1989Q1	10.64	13.24	17.90	6.75	9.37	11.70	6.91	9.21	9.85	10.30	13.48	13.33	8.90	4.95	4.75	6.98	10.96	11.81	8.33
1989Q2	11.07	13.21	19.17	7.09	9.79	11.98	7.22	8.77	10.30	9.89	13.65	13.64	8.78	5.21	5.20	7.08	10.71	12.58	8.39
1989Q3	11.06	12.47	19.83	7.15	9.47	12.07	7.11	8.11	10.09	9.40	13.23	13.34	8.51	5.01	5.28	6.98	10.76	13.02	8.44
1989Q4	11.95	12.40	20.40	7.57	10.21	12.60	7.63	7.91	10.52	9.54	13.35	14.10	9.00	5.35	5.56	7.52	10.87	13.74	9.19
1990Q1	13.44	12.19	20.77	8.44	11.02	12.92	8.66	8.42	11.55	10.33	13.13	14.66	9.86	6.71	6.40	8.23	10.66	13.99	10.28
1990Q2	13.27	12.29	20.13	8.78	10.46	13.22	8.93	8.68	12.32	11.13	13.55	14.64	9.64	6.61	6.39	8.73	10.83	13.48	9.97
1990Q3	13.14	12.55	20.97	8.83	10.44	13.33	8.96	8.70	12.03	10.77	13.42	14.75	10.06	7.48	6.40	8.87	10.60	13.22	9.95
1990Q4	12.78	12.74	21.40	8.85	10.60	13.37	9.13	8.40	11.32	10.68	12.67	14.66	10.17	7.05	6.60	9.00	10.62	13.46	10.04
1991Q1	11.44	11.63	22.50	8.60	9.67	12.73	8.82	8.02	10.34	9.78	11.62	13.93	9.33	6.44	6.28	8.57	10.47	13.78	9.51
1991Q2	10.90	10.19	22.00	8.45	9.18	11.61	8.60	8.13	10.38	9.67	10.99	12.10	8.96	6.67	5.94	8.40	9.95	13.20	9.22
1991Q3	10.47	9.71	20.87	8.62	9.27	11.10	8.81	7.94	9.98	9.72	10.77	11.94	9.04	6.39	6.15	8.57	9.74	13.27	9.37
1991Q4	9.95	8.91	19.77	8.52	8.93	11.40	8.73	7.35	9.72	8.69	9.82	11.47	8.81	5.84	6.59	8.30	9.83	12.88	9.14
1992Q1	9.45	9.12	21.67	8.27	8.60	11.39	8.33	7.30	9.48	8.40	9.97	10.84	8.53	5.52	6.31	7.97	9.40	12.62	8.76
1992Q2	9.52	8.78	21.13	8.32	8.87	11.96	8.31	7.38	9.19	8.53	9.28	11.02	8.67	5.70	6.81	8.07	9.40	12.79	8.87
1992Q3	10.55	7.92	20.40	8.30	9.45	12.85	8.25	6.62	9.20	7.52	8.68	12.23	8.90	5.18	6.71	7.97	9.89	13.81	8.93
1992Q4	10.55	7.78	19.33	7.67	9.03	11.69	7.52	6.74	8.39	7.80	8.85	12.69	8.25	4.91	5.76	7.40	9.74	13.85	8.07
1993Q1	9.77	7.70	19.00	7.07	8.49	10.35	6.85	6.28	7.99	7.71	8.36	11.65	7.67	4.48	4.99	6.93	8.33	13.13	7.52
1993Q2	9.06	7.31	18.47	6.99	7.51	9.43	6.62	5.99	8.00	7.49	7.60	11.09	7.09	4.79	4.68	6.77	7.11	12.41	7.33
1993Q3	7.89	6.59	10.26	6.60	6.85	8.15	6.20	5.62	7.22	7.02	6.91	9.60	6.40	4.31	4.43	6.40	6.31	10.11	7.09
1993Q4	7.44	6.14	9.28	6.16	6.37	7.36	5.77	5.61	6.67	6.77	6.67	8.51	5.93	3.70	4.11	5.97	5.78	9.09	6.93
1994Q1	7.14	5.93	8.83	6.11	6.33	6.86	5.92	6.07	6.79	6.86	6.91	8.30	5.99	4.03	4.31	6.07	5.74	8.96	6.76
1994Q2	8.96	7.21	10.02	7.02	7.54	8.78	6.80	7.08	8.35	8.48	8.70	9.63	7.05	4.12	4.91	6.77	7.30	9.63	7.52
1994Q3	11.03	8.45	11.50	7.30	8.60	10.34	7.17	7.33	8.79	8.99	9.64	10.83	7.70	4.65	5.30	7.17	8.25	11.39	8.19
1994Q4	10.85	8.91	11.57	7.68	8.84	10.17	7.56	7.84	8.74	9.10	10.33	11.23	8.12	4.65	5.32	7.50	8.45	12.10	8.34
1995Q1	10.96	8.51	11.82	7.63	8.96	10.21	7.56	7.48	8.73	8.96	10.21	11.91	8.09	4.41	5.18	7.43	8.05	12.74	8.25
1995Q2	10.91	7.59	11.99	7.18	8.44	8.98	6.97	6.62	8.29	8.10	9.25	11.68	7.60	3.32	4.72	6.93	7.59	12.70	7.47
1995Q3	10.14	7.78	11.38	7.00	8.09	8.35	6.72	6.32	8.14	8.10	8.96	11.04	7.37	3.06	4.41	6.73	7.35	11.80	7.06
1995Q4	8.96	7.23	10.66	6.73	7.59	7.62	6.34	5.89	7.80	7.48	8.42	10.46	7.09	2.99	3.78	6.33	6.71	11.59	6.73
1996Q1	8.58	7.37	9.45	6.40	7.35	7.47	6.18	5.91	7.77	7.34	8.39	9.69	6.56	3.23	4.08	6.17	6.68	10.55	6.48
1996Q2	8.37	8.53	8.97	6.50	7.41	7.35	6.39	6.72	8.08	7.77	8.88	9.20	6.50	3.31	4.19	6.50	6.89	9.87	6.49
1996Q3	8.06	8.34	8.58	6.43	7.27	7.05	6.25	6.78	7.87	7.45	8.22	8.69	6.34	3.14	4.02	6.33	7.00	9.36	6.41
1996Q4	7.10	7.34	7.24	5.96	6.75	6.44	5.79	6.34	7.58	6.40	7.34	7.37	5.85	2.72	3.70	5.90	6.53	7.83	5.81
1997Q1	6.84	7.49	6.75	5.71	6.40	6.06	5.59	6.56	7.41	6.48	7.58	6.87	5.60	2.58	3.50	5.70	5.87	7.54	5.61
1997Q2	7.00	7.62	6.57	5.82	6.52	6.20	5.70	6.70	7.32	6.55	7.58	6.68	5.71	2.60	3.29	5.80	6.06	7.37	5.70
1997Q3	6.43	6.91	6.25	5.65	6.17	5.86	5.55	6.24	6.98	5.95	6.54	6.20	5.52	2.36	3.33	5.63	5.97	6.51	5.50
1997Q4	6.18	6.75	5.87	5.55	5.96	5.71	5.47	5.91	6.49	5.60	6.12	5.86	5.49	1.96	3.31	5.50	5.66	6.02	5.54
1998Q1	5.51	6.83	5.32	5.08	5.40	5.17	5.01	5.59	6.02	5.41	5.85	5.24	5.03	1.93	3.05	5.00	5.30	5.34	5.03
1998Q2	5.13	6.69	5.14	4.96	5.22	5.01	4.93	5.60	5.78	5.34	5.63	5.07	4.94	1.69	3.28	4.90	5.43	5.14	4.96
1998Q3	4.81	6.15	4.72	4.59	4.93	4.66	4.49	5.20	5.48	5.39	5.50	4.72	4.50	1.43	3.09	4.40	5.44	4.76	4.57
1998Q4	4.51	5.48	4.33	4.23	4.62	4.31	4.09	4.67	4.80	4.99	4.98	4.31	4.09	1.12	2.76	4.03	5.43	4.29	4.21
1999Q1	4.21	5.66	4.05	3.99	4.25	4.07	3.96	4.98	4.47	5.09	5.32	4.05	3.95	1.95	2.57	3.87	4.89	4.08	4.04
1999Q2	4.54	6.11	4.37	4.26	4.50	4.30	4.23	5.54	4.89	5.31	5.81	4.32	4.20	1.51	2.73	4.10	5.04	4.34	4.28
1999Q3	5.48	6.78	5.21	5.08	5.35	5.13	5.02	5.88	5.46	5.65	6.27	5.13	5.00	1.78	3.21	4.87	5.94	5.12	5.10
1999Q4	5.69	7.10	5.48	5.38	5.57	5.40	5.30	6.14	5.50	6.10	6.63	5.41	5.28	1.76	3.64	5.17	6.12	5.38	5.44
2000Q1	5.79	7.28	5.73	5.70	5.79	5.65	5.60	6.48	5.60	6.31	6.90	5.68	5.57	1.77	3.94	5.43	6.28	5.69	5.67
2000Q2	5.30	6.93	5.58	5.56	5.69	5.48	5.40	6.18	5.30	6.01	6.30	5.51	5.38	1.70	4.09	5.27	6.14	5.55	5.56
2000Q3	5.29	6.71	5.60	5.57	5.71	5.47	5.39	5.89	5.28	5.79	6.18	5.53	5.39	1.77	3.92	5.27	6.25	5.59	5.59
2000Q4	5.09	6.48	5.46	5.40	5.45	5.33	5.23	5.57	5.05	5.61	5.88	5.38	5.23	1.73	3.75	5.10	6.21	5.48	5.46
2001Q1	4.83	6.02	5.13	5.07	5.09	4.99	4.89	5.05	4.81	5.38	5.29	5.08	4.90	1.36	3.44	4.77	5.97	5.17	5.11
2001Q2	5.19	6.50	5.36	5.26	5.27	5.22	5.14	5.27	5.10	5.71	5.81	5.29	5.12	1.24	3.49	4.97	6.43	5.37	5.25
2001Q3	5.28	6.62	5.25	5.15	5.18	5.13	5.04	4.98	5.05	5.56	5.81	5.22	5.01	1.33	3.33	4.87	6.50	5.27	5.11
2001Q4	5.12	6.44	4.90	4.82	4.83	4.83	4.76	4.77	4.79	5.26	5.56	4.88	4.72	1.34	3.27	4.60	6.04	4.94	4.79
2002Q1	5.42	6.69	5.21	5.16	5.21	5.16	5.09	5.08	5.05	5.45	6.04	5.17	5.06	1.45	3.61	4.98	6.40	5.25	5.11
2002Q2	5.63	6.77	5.35	5.31	5.36	5.33	5.24	5.10	5.22	5.57	6.17	5.31	5.20	1.36	3.43	5.11	6.75	5.35	5.24
2002Q3	5.16	6.35	4.87	4.81	4.92	4.84	4.73	4.26	4.74	5.11	5.65	4.81	4.70	1.23	3.07	4.61	6.31	4.85	4.72
2002Q4	5.00	6.30	4.60	4.58	4.74	4.60	4.50	4.01	4.61	5.06	5.52	4.55	4.49	1.02	2.69	4.42	6.07	4.68	4.50
2003Q1	4.58	5.97	4.13	4.12	4.30	4.14	4.06	3.92	4.32	4.98	5.24	4.10	4.11	0.80	2.44	4.04	5.42	4.24	4.08
2003Q2	4.43	5.60	3.96	3.92	4.12	3.95	3.95	3.62	4.27	4.66	5.06	3.92	3.93	0.59	2.54	3.86	4.93	4.16	3.99
2003Q3	4.65	5.80	4.22	4.19	4.31	4.13	4.15	4.23	4.55	4.79	5.42	4.14	4.13	1.26	2.77	4.09	4.94	4.33	4.17
2003Q4	4.90	6.09	4.41	4.39	4.51	4.33	4.34	4.29	4.94	4.79	5.75	4.34	4.34	1.37	2.89	4.29	4.90	4.45	4.35
2004Q1	4.50	5.86	4.15	4.20	4.25	4.06	4.08	4.02	4.77	4.43	5.58	4.12	4.11	1.32	2.72	4.06	4.32	4.28	4.10
2004Q2	4.65	6.20	4.38	4.33	4.43	4.28	4.31	4.60	5.08	4.78	5.87	4.31	4.31	1.61	2.91	4.22	4.77	4.46	4.26
2004Q3	4.45	6.18	4.22	4.24	4.48	4.24	4.18	4.30	4.99	4.67	5.57	4.17	4.16	1.60	2.84	4.11	4.33	4.32	4.13
2004Q4	4.09	6.03	3.83	3.84	4.06	3.86	3.81	4.17	4.65	4.45	5.35	3.82	3.83	1.44	2.48	3.75	4.06	3.97	3.76
2005Q1	3.82	6.04	3.60	3.60	3.73	3.63	3.60	4.30	4.63	4.28	5.47	3.63	3.64	1.35	2.33	3.60	3.90	3.74	3.56
2005Q2	3.34	5.84	3.35	3.37	3.38	3.33	3.30	4.16	4.44	4.03	5.30	3.36	3.37	1.21	2.03	3.30	3.71	3.54	3.36
2005Q3	3.06	5.74	3.32	3.22	3.16	3.14	3.22	4.21	4.28	3.90	5.20	3.18	3.23	1.37	1.94	3.17	3.56	3.39	3.18
2005Q4	3.31	5.89	3.48	3.36	3.34	3.30	3.37	4.49	4.30	4.06	5.39	3.37	3.39	1.49	2.08	3.34	3.82	3.55	3.35
2006Q1	3.43	5.71	3.61	3.47	3.50	3.45	3.49	4.57	4.09	4.13	5.27	3.49	3.51	1.64	2.31	3.48	3.74	3.72	3.50
2006Q2	3.89	5.80	4.07	3.99	4.01	3.95	3.95	5.07	4.55	4.43	5.69	3.97	3.99	1.90	2.77	3.94	4.17	4.27	3.99
2006Q3	3.83	5.84	4.05	3.93	3.93	3.93	3.89	4.90	4.59	4.27	5.74	3.89	3.90	1.74	2.55	3.88	4.21	4.17	3.92
2006Q4	3.67	5.77	3.94	3.80	3.81	3.80	3.79	4.63	4.57	4.03	5.65	3.79	3.79	1.68	2.44	3.76	4.19	4.03	3.81

Figure 5: Long-term Nominal Bond-yield Models with Expectational Variables

Data for Figure 5 - Residuals

Date	US	UK	JAPAN	SWEDEN	SWITZ	FRANCE	NETHER	CANADA	SPAIN	NORWAY
1990Q2	0.05	NA	-0.02	-0.01	-0.29	-0.39	0.00	0.45	-0.29	0.44
1990Q3	0.05	NA	0.80	0.63	0.13	0.39	0.09	-0.35	0.39	0.03
1990Q4	-0.16	NA	-0.22	-0.11	0.10	0.37	0.35	0.25	0.25	0.19
1991Q1	-0.01	-0.46	-0.53	-0.44	-0.21	-0.42	-0.23	-0.29	0.17	0.12
1991Q2	0.56	0.35	0.12	0.34	-0.10	0.23	0.03	0.38	-0.54	-0.11
1991Q3	0.22	-0.11	-0.16	0.12	0.23	0.45	0.42	0.29	0.30	0.24
1991Q4	-0.04	0.14	-0.35	-0.14	0.34	0.05	0.02	-0.49	-0.83	0.40
1992Q1	0.34	0.05	-0.23	-0.37	-0.30	-0.24	-0.24	-0.06	-0.38	-0.24
1992Q2	0.29	0.19	0.28	0.13	0.57	0.06	0.23	0.15	0.32	0.52
1992Q3	-0.44	0.51	-0.22	-0.07	-0.03	0.12	0.04	-0.90	1.01	0.48
1992Q4	0.45	-0.40	-0.05	0.15	-0.31	-0.28	-0.54	-0.03	0.27	-0.69
1993Q1	-0.42	-0.20	-0.29	-0.37	-0.21	-0.38	-0.34	-0.50	-0.61	-0.72
1993Q2	-0.28	0.06	0.49	-0.06	0.03	-0.23	0.09	-0.11	0.54	-0.39
1993Q3	-0.50	-0.73	-0.14	-0.66	-0.18	-0.09	-0.23	-0.08	-0.64	-0.26
1993Q4	-0.19	-0.52	-0.17	0.03	-0.25	0.26	-0.17	0.11	-0.43	-0.28
1994Q1	0.06	0.03	0.52	-0.31	0.00	-0.05	0.35	0.20	-0.36	-0.11
1994Q2	0.58	1.39	0.36	1.74	0.29	0.69	0.87	1.50	0.74	1.34
1994Q3	-0.01	0.18	0.85	1.39	0.17	0.20	0.14	0.30	0.48	0.42
1994Q4	0.57	0.05	0.46	-0.72	0.09	0.16	0.36	0.31	-0.17	0.07
1995Q1	-0.18	0.22	0.13	0.32	0.05	0.01	0.01	0.01	0.51	-0.15
1995Q2	-0.56	-0.28	-0.61	0.14	-0.18	-0.27	-0.38	-0.67	-0.32	-0.21
1995Q3	-0.15	0.07	-0.03	-0.39	0.00	0.03	0.13	0.19	-0.34	-0.13
1995Q4	-0.41	-0.16	0.12	-0.57	-0.34	0.06	-0.16	-0.30	0.14	-0.64
1996Q1	-0.03	0.04	0.30	0.23	0.57	-0.30	0.11	0.05	0.09	0.05
1996Q2	0.68	0.33	0.18	0.21	0.11	0.16	0.42	0.59	0.37	0.26
1996Q3	-0.08	-0.24	0.03	0.09	0.04	0.08	-0.07	-0.05	0.11	0.18
1996Q4	-0.30	-0.23	-0.22	-0.39	0.13	-0.16	-0.27	-0.51	-0.46	-0.30
1997Q1	0.33	0.09	-0.06	0.13	-0.06	-0.20	0.06	0.17	0.16	-0.30
1997Q2	0.16	0.15	0.10	0.17	-0.14	0.01	0.23	-0.02	-0.08	0.32
1997Q3	-0.21	0.11	-0.12	-0.51	0.08	-0.18	-0.12	-0.21	-0.32	-0.20
1997Q4	-0.05	0.04	-0.30	0.29	-0.05	0.10	0.04	-0.07	0.02	-0.31
1998Q1	-0.16	0.07	-0.01	-0.24	-0.29	-0.22	-0.35	-0.15	-0.34	-0.30
1998Q2	0.05	0.19	-0.23	0.23	0.19	0.14	0.14	-0.12	0.36	0.06
1998Q3	-0.37	0.22	-0.22	0.18	-0.21	-0.29	-0.38	-0.04	-0.25	-0.42
1998Q4	-0.43	-0.10	-0.27	0.21	-0.06	-0.11	-0.24	-0.35	-0.08	-0.31
1999Q1	0.21	-0.12	0.80	0.04	-0.11	-0.09	-0.02	0.01	0.19	-0.75
1999Q2	0.28	0.41	-0.24	0.57	0.18	0.21	0.30	0.13	0.40	0.18
1999Q3	0.25	0.40	0.28	0.85	0.42	0.69	0.68	0.38	0.59	0.81
1999Q4	0.32	-0.16	-0.01	-0.07	0.36	0.04	-0.03	0.29	-0.34	0.05
2000Q1	0.47	0.17	-0.07	0.15	0.23	0.30	0.21	0.39	0.33	0.26
2000Q2	-0.08	-0.23	-0.16	-0.39	0.14	-0.21	-0.31	-0.10	-0.09	-0.03
2000Q3	-0.08	0.07	-0.04	0.20	-0.09	0.07	0.04	-0.14	-0.03	0.23
2000Q4	-0.22	-0.23	-0.11	-0.18	-0.12	-0.10	-0.18	-0.22	-0.37	-0.06
2001Q1	-0.41	-0.25	-0.38	-0.22	-0.21	-0.20	-0.34	-0.22	-0.23	-0.13
2001Q2	0.24	0.18	-0.17	0.39	0.10	0.34	0.30	0.36	0.28	0.54
2001Q3	-0.23	-0.22	0.11	-0.05	-0.15	0.05	-0.19	0.02	-0.15	0.02
2001Q4	0.16	-0.16	0.14	-0.06	0.26	0.35	-0.16	0.45	0.28	-0.16
2002Q1	0.41	0.22	0.13	0.23	0.37	0.39	0.44	0.47	0.60	0.56
2002Q2	0.12	0.16	0.00	-0.03	-0.12	0.08	0.05	0.27	0.22	0.32
2002Q3	-0.60	-0.37	-0.07	-0.63	-0.05	-0.44	-0.48	-0.29	-0.22	-0.38
2002Q4	-0.01	0.09	-0.15	0.04	0.12	0.25	0.06	0.03	0.29	0.13
2003Q1	-0.16	-0.17	-0.19	-0.37	-0.13	-0.35	-0.31	0.01	-0.12	-0.30
2003Q2	-0.30	0.00	-0.22	-0.02	0.18	-0.08	0.10	-0.25	0.08	0.01
2003Q3	0.70	0.17	0.56	0.34	0.35	0.30	0.28	0.26	0.28	0.44
2003Q4	0.00	0.20	0.07	0.27	0.24	0.30	0.19	0.17	0.14	0.18
2004Q1	-0.12	-0.26	-0.10	-0.42	-0.14	-0.29	-0.32	-0.23	-0.27	-0.41
2004Q2	0.66	0.33	0.21	0.36	0.22	0.21	0.33	0.44	0.27	0.65
2004Q3	-0.42	-0.12	-0.03	-0.16	-0.13	-0.25	-0.21	-0.07	-0.19	-0.48
2004Q4	-0.17	-0.31	-0.18	-0.22	-0.33	-0.34	-0.31	-0.16	-0.24	-0.08
2005Q1	-0.05	0.04	-0.22	-0.19	-0.15	-0.26	-0.11	-0.11	-0.04	-0.07
2005Q2	-0.37	-0.25	-0.30	-0.43	-0.40	-0.37	-0.28	-0.22	-0.27	-0.18
2005Q3	-0.14	-0.19	-0.07	-0.24	-0.19	-0.23	-0.05	-0.22	-0.38	-0.20
2005Q4	-0.09	0.04	-0.08	0.11	-0.12	0.02	0.09	-0.10	-0.24	0.11
2006Q1	-0.05	-0.32	0.05	-0.31	-0.09	-0.10	-0.02	-0.20	-0.21	-0.27
2006Q2	0.46	0.31	0.25	0.09	0.15	0.33	0.32	0.02	0.26	0.32
2006Q3	-0.18	-0.25	-0.09	-0.51	-0.52	-0.23	-0.32	-0.44	-0.44	-0.16
2006Q4	0.00	-0.21	-0.01	-0.50	-0.22	-0.14	-0.19	-0.37	-0.18	-0.16

Data for Figure 5 - Actual

Date	US	UK	JAPAN	SWEDEN	SWITZ	FRANCE	NETHER	CANADA	SPAIN	NORWAY
1990Q2	8.68	-	6.61	13.27	6.39	9.64	8.93	11.13	14.64	10.83
1990Q3	8.70	-	7.48	13.14	6.40	10.06	8.96	10.77	14.75	10.60
1990Q4	8.40	-	7.05	12.78	6.60	10.17	9.13	10.68	14.66	10.62
1991Q1	8.02	10.34	6.44	11.44	6.28	9.33	8.82	9.78	13.93	10.47
1991Q2	8.13	10.38	6.67	10.90	5.94	8.96	8.60	9.67	12.10	9.95
1991Q3	7.94	9.98	6.39	10.47	6.15	9.04	8.81	9.72	11.94	9.74
1991Q4	7.35	9.72	5.84	9.95	6.59	8.81	8.73	8.69	11.47	9.83
1992Q1	7.30	9.48	5.52	9.45	6.31	8.53	8.33	8.40	10.84	9.40
1992Q2	7.38	9.19	5.70	9.52	6.81	8.67	8.31	8.53	11.02	9.40
1992Q3	6.62	9.20	5.18	10.55	6.71	8.90	8.25	7.52	12.23	9.89
1992Q4	6.74	8.39	4.91	10.55	5.76	8.25	7.52	7.80	12.69	9.74
1993Q1	6.28	7.99	4.48	9.77	4.99	7.67	6.85	7.71	11.65	8.33
1993Q2	5.99	8.00	4.79	9.06	4.68	7.09	6.62	7.49	11.09	7.11
1993Q3	5.62	7.22	4.31	7.89	4.43	6.40	6.20	7.02	9.60	6.31
1993Q4	5.61	6.67	3.70	7.44	4.11	5.93	5.77	6.77	8.51	5.78
1994Q1	6.07	6.79	4.03	7.14	4.31	5.99	5.92	6.86	8.30	5.74
1994Q2	7.08	8.35	4.12	8.96	4.91	7.05	6.80	8.48	9.63	7.30
1994Q3	7.33	8.79	4.65	11.03	5.30	7.70	7.17	8.99	10.83	8.25
1994Q4	7.84	8.74	4.65	10.85	5.32	8.12	7.56	9.10	11.23	8.45
1995Q1	7.48	8.73	4.41	10.96	5.18	8.09	7.56	8.96	11.91	8.05
1995Q2	6.62	8.29	3.32	10.91	4.72	7.60	6.97	8.10	11.68	7.59
1995Q3	6.32	8.14	3.06	10.14	4.41	7.37	6.72	8.10	11.04	7.35
1995Q4	5.89	7.80	2.99	8.96	3.78	7.09	6.34	7.48	10.46	6.71
1996Q1	5.91	7.77	3.23	8.58	4.08	6.56	6.18	7.34	9.69	6.68
1996Q2	6.72	8.08	3.31	8.37	4.19	6.50	6.39	7.77	9.20	6.89
1996Q3	6.78	7.87	3.14	8.06	4.02	6.34	6.25	7.45	8.69	7.00
1996Q4	6.34	7.58	2.72	7.10	3.70	5.85	5.79	6.40	7.37	6.53
1997Q1	6.56	7.41	2.58	6.84	3.50	5.60	5.59	6.48	6.87	5.87
1997Q2	6.70	7.32	2.60	7.00	3.29	5.71	5.70	6.55	6.68	6.06
1997Q3	6.24	6.98	2.36	6.43	3.33	5.52	5.55	5.95	6.20	5.97
1997Q4	5.91	6.49	1.96	6.18	3.31	5.49	5.47	5.60	5.86	5.66
1998Q1	5.59	6.02	1.93	5.51	3.05	5.03	5.01	5.41	5.24	5.30
1998Q2	5.60	5.78	1.69	5.13	3.28	4.94	4.93	5.34	5.07	5.43
1998Q3	5.20	5.48	1.43	4.81	3.09	4.50	4.49	5.39	4.72	5.44
1998Q4	4.67	4.80	1.12	4.51	2.76	4.09	4.09	4.99	4.31	5.43
1999Q1	4.98	4.47	1.95	4.21	2.57	3.95	3.96	5.09	4.05	4.89
1999Q2	5.54	4.89	1.51	4.54	2.73	4.20	4.23	5.31	4.32	5.04
1999Q3	5.88	5.46	1.78	5.48	3.21	5.00	5.02	5.65	5.13	5.94
1999Q4	6.14	5.50	1.76	5.69	3.64	5.28	5.30	6.10	5.41	6.12
2000Q1	6.48	5.60	1.77	5.79	3.94	5.57	5.60	6.31	5.68	6.28
2000Q2	6.18	5.30	1.70	5.30	4.09	5.38	5.40	6.01	5.51	6.14
2000Q3	5.89	5.28	1.77	5.29	3.92	5.39	5.39	5.79	5.53	6.25
2000Q4	5.57	5.05	1.73	5.09	3.75	5.23	5.23	5.61	5.38	6.21
2001Q1	5.05	4.81	1.36	4.83	3.44	4.90	4.89	5.38	5.08	5.97
2001Q2	5.27	5.10	1.24	5.19	3.49	5.12	5.14	5.71	5.29	6.43
2001Q3	4.98	5.05	1.33	5.28	3.33	5.01	5.04	5.56	5.22	6.50
2001Q4	4.77	4.79	1.34	5.12	3.27	4.72	4.76	5.26	4.88	6.04
2002Q1	5.08	5.05	1.45	5.42	3.61	5.06	5.09	5.45	5.17	6.40
2002Q2	5.10	5.22	1.36	5.63	3.43	5.20	5.24	5.57	5.31	6.75
2002Q3	4.26	4.74	1.23	5.16	3.07	4.70	4.73	5.11	4.81	6.31
2002Q4	4.01	4.61	1.02	5.00	2.69	4.49	4.50	5.06	4.55	6.07
2003Q1	3.92	4.32	0.80	4.58	2.44	4.11	4.06	4.98	4.10	5.42
2003Q2	3.62	4.27	0.59	4.43	2.54	3.93	3.95	4.66	3.92	4.93
2003Q3	4.23	4.55	1.26	4.65	2.77	4.13	4.15	4.79	4.14	4.94
2003Q4	4.29	4.94	1.37	4.90	2.89	4.34	4.34	4.79	4.34	4.90
2004Q1	4.02	4.77	1.32	4.50	2.72	4.11	4.08	4.43	4.12	4.32
2004Q2	4.60	5.08	1.61	4.65	2.91	4.31	4.31	4.78	4.31	4.77
2004Q3	4.30	4.99	1.60	4.45	2.84	4.16	4.18	4.67	4.17	4.33
2004Q4	4.17	4.65	1.44	4.09	2.48	3.83	3.81	4.45	3.82	4.06
2005Q1	4.30	4.63	1.35	3.82	2.33	3.64	3.60	4.28	3.63	3.90
2005Q2	4.16	4.44	1.21	3.34	2.03	3.37	3.30	4.03	3.36	3.71
2005Q3	4.21	4.28	1.37	3.06	1.94	3.23	3.22	3.90	3.18	3.56
2005Q4	4.49	4.30	1.49	3.31	2.08	3.39	3.37	4.06	3.37	3.82
2006Q1	4.57	4.09	1.64	3.43	2.31	3.51	3.49	4.13	3.49	3.74
2006Q2	5.07	4.55	1.90	3.89	2.77	3.99	3.95	4.43	3.97	4.17
2006Q3	4.90	4.59	1.74	3.83	2.55	3.90	3.89	4.27	3.89	4.21
2006Q4	4.63	4.57	1.68	3.67	2.44	3.79	3.79	4.03	3.79	4.19

Data for Figure 5 - Fitted

Date	US	UK	JAPAN	SWEDEN	SWITZ	FRANCE	NETHER	CANADA	SPAIN	NORWAY
1990Q2	8.63	NA	6.63	13.28	6.68	10.03	8.93	10.68	14.93	10.40
1990Q3	8.65	NA	6.67	12.51	6.28	9.67	8.88	11.12	14.36	10.58
1990Q4	8.56	NA	7.26	12.89	6.50	9.80	8.78	10.43	14.42	10.43
1991Q1	8.03	10.80	6.97	11.89	6.49	9.75	9.05	10.07	13.76	10.35
1991Q2	7.57	10.04	6.55	10.56	6.04	8.73	8.57	9.29	12.64	10.06
1991Q3	7.72	10.10	6.55	10.35	5.92	8.59	8.39	9.43	11.64	9.49
1991Q4	7.39	9.58	6.19	10.08	6.25	8.76	8.71	9.18	12.30	9.44
1992Q1	6.96	9.43	5.75	9.82	6.60	8.77	8.57	8.45	11.22	9.64
1992Q2	7.09	9.00	5.42	9.39	6.24	8.61	8.08	8.38	10.70	8.88
1992Q3	7.06	8.69	5.40	10.62	6.74	8.78	8.20	8.42	11.22	9.41
1992Q4	6.29	8.78	4.96	10.40	6.07	8.54	8.06	7.83	12.42	10.44
1993Q1	6.70	8.19	4.77	10.14	5.20	8.05	7.19	8.20	12.26	9.05
1993Q2	6.27	7.94	4.30	9.12	4.65	7.32	6.53	7.60	10.55	7.50
1993Q3	6.12	7.95	4.45	8.54	4.61	6.49	6.43	7.10	10.24	6.57
1993Q4	5.80	7.19	3.87	7.41	4.36	5.67	5.94	6.66	8.94	6.06
1994Q1	6.01	6.75	3.51	7.46	4.30	6.04	5.58	6.66	8.66	5.85
1994Q2	6.50	6.95	3.76	7.21	4.62	6.36	5.93	6.98	8.89	5.96
1994Q3	7.35	8.61	3.80	9.64	5.13	7.51	7.03	8.68	10.35	7.83
1994Q4	7.27	8.69	4.20	11.57	5.22	7.96	7.20	8.79	11.40	8.39
1995Q1	7.66	8.51	4.28	10.65	5.14	8.08	7.55	8.95	11.39	8.20
1995Q2	7.18	8.57	3.93	10.77	4.90	7.86	7.35	8.77	12.00	7.80
1995Q3	6.48	8.07	3.09	10.53	4.41	7.34	6.60	7.91	11.38	7.48
1995Q4	6.30	7.96	2.87	9.53	4.12	7.03	6.50	7.78	10.32	7.35
1996Q1	5.94	7.73	2.93	8.35	3.51	6.86	6.07	7.29	9.59	6.62
1996Q2	6.04	7.75	3.13	8.16	4.08	6.34	5.97	7.18	8.83	6.63
1996Q3	6.86	8.11	3.11	7.97	3.99	6.25	6.32	7.50	8.58	6.82
1996Q4	6.65	7.81	2.94	7.49	3.57	6.00	6.06	6.91	7.83	6.83
1997Q1	6.23	7.32	2.64	6.71	3.56	5.79	5.53	6.31	6.71	6.17
1997Q2	6.53	7.17	2.50	6.83	3.43	5.71	5.47	6.57	6.76	5.74
1997Q3	6.45	6.88	2.48	6.95	3.25	5.71	5.67	6.16	6.52	6.17
1997Q4	5.95	6.46	2.26	5.89	3.36	5.39	5.42	5.66	5.84	5.97
1998Q1	5.75	5.95	1.95	5.75	3.35	5.25	5.36	5.56	5.58	5.60
1998Q2	5.55	5.59	1.92	4.90	3.08	4.80	4.79	5.46	4.71	5.38
1998Q3	5.57	5.26	1.65	4.64	3.30	4.79	4.87	5.43	4.96	5.86
1998Q4	5.10	4.90	1.39	4.30	2.82	4.20	4.33	5.34	4.38	5.74
1999Q1	4.77	4.59	1.15	4.17	2.68	4.04	3.98	5.08	3.86	5.65
1999Q2	5.26	4.48	1.75	3.97	2.55	3.99	3.93	5.18	3.92	4.86
1999Q3	5.63	5.06	1.50	4.63	2.79	4.32	4.34	5.27	4.54	5.13
1999Q4	5.82	5.66	1.77	5.76	3.28	5.25	5.33	5.82	5.75	6.07
2000Q1	6.01	5.43	1.84	5.63	3.71	5.27	5.39	5.92	5.35	6.02
2000Q2	6.25	5.54	1.86	5.69	3.95	5.59	5.71	6.12	5.61	6.17
2000Q3	5.97	5.21	1.81	5.09	4.01	5.32	5.35	5.93	5.56	6.01
2000Q4	5.79	5.28	1.84	5.27	3.87	5.33	5.41	5.82	5.75	6.26
2001Q1	5.46	5.06	1.74	5.05	3.65	5.11	5.23	5.61	5.31	6.11
2001Q2	5.03	4.92	1.41	4.80	3.39	4.78	4.84	5.35	5.01	5.89
2001Q3	5.21	5.26	1.23	5.33	3.47	4.97	5.23	5.55	5.37	6.48
2001Q4	4.61	4.95	1.20	5.18	3.01	4.37	4.92	4.80	4.60	6.20
2002Q1	4.67	4.83	1.32	5.19	3.24	4.66	4.65	4.98	4.57	5.84
2002Q2	4.98	5.06	1.36	5.67	3.55	5.13	5.18	5.30	5.09	6.43
2002Q3	4.86	5.11	1.30	5.79	3.11	5.14	5.21	5.40	5.03	6.69
2002Q4	4.02	4.52	1.16	4.96	2.57	4.23	4.44	5.03	4.26	5.94
2003Q1	4.08	4.49	0.98	4.95	2.56	4.46	4.36	4.96	4.21	5.72
2003Q2	3.92	4.26	0.81	4.45	2.36	4.01	3.86	4.91	3.84	4.92
2003Q3	3.53	4.39	0.70	4.31	2.42	3.83	3.86	4.53	3.86	4.50
2003Q4	4.29	4.74	1.30	4.62	2.65	4.04	4.15	4.62	4.20	4.72
2004Q1	4.14	5.02	1.42	4.92	2.86	4.39	4.39	4.66	4.38	4.72
2004Q2	3.94	4.75	1.40	4.29	2.69	4.10	3.98	4.33	4.03	4.11
2004Q3	4.72	5.11	1.62	4.61	2.97	4.41	4.39	4.74	4.36	4.81
2004Q4	4.35	4.96	1.62	4.31	2.82	4.17	4.13	4.62	4.06	4.14
2005Q1	4.34	4.59	1.57	4.01	2.47	3.90	3.71	4.38	3.67	3.97
2005Q2	4.53	4.70	1.51	3.77	2.43	3.74	3.58	4.25	3.63	3.89
2005Q3	4.36	4.47	1.44	3.30	2.13	3.46	3.27	4.12	3.56	3.76
2005Q4	4.58	4.26	1.57	3.20	2.20	3.37	3.28	4.16	3.61	3.71
2006Q1	4.62	4.41	1.59	3.74	2.40	3.61	3.51	4.33	3.69	4.01
2006Q2	4.61	4.24	1.66	3.79	2.62	3.66	3.63	4.41	3.71	3.85
2006Q3	5.07	4.84	1.83	4.35	3.07	4.13	4.21	4.71	4.33	4.37
2006Q4	4.63	4.79	1.69	4.16	2.66	3.93	3.98	4.40	3.97	4.36

Figure 6: Corporate Bond Yields*

Data for Figure 6 immediately follows

* Yields computed as Long-term government bond yields plus credit spreads on 10-yr. rated corporate bonds.

Data for Figure 6

Date	AA Yields US	AA Yields UK	AA Yields CANADA	AA Yields JAPAN	AA Yields EU	BBB Yields US	BBB Yields UK	BBB Yields CANADA	BBB Yields JAPAN	BBB Yields EU
1992Q1	ND	ND	9.51	ND	ND	ND	ND	10.14	ND	ND
1992Q2	ND	ND	9.54	ND	ND	ND	ND	10.68	ND	ND
1992Q3	ND	ND	8.67	ND	ND	ND	ND	9.46	ND	ND
1992Q4	ND	9.49	8.9	ND	ND	ND	ND	9.36	ND	ND
1993Q1	ND	9.2	8.84	ND	ND	ND	ND	9.07	ND	ND
1993Q2	ND	8.71	8.68	ND	ND	ND	9.08	8.92	ND	ND
1993Q3	ND	7.71	7.94	ND	ND	ND	8.93	8.27	ND	ND
1993Q4	ND	7.32	7.54	ND	ND	ND	8.35	7.77	ND	ND
1994Q1	ND	7.5	7.48	ND	ND	ND	8.66	7.95	ND	ND
1994Q2	ND	9.22	9.02	ND	ND	ND	10.29	9.53	ND	ND
1994Q3	ND	9.67	9.68	ND	ND	ND	10.66	9.78	ND	ND
1994Q4	ND	9.5	9.71	ND	ND	ND	10.44	9.79	ND	ND
1995Q1	ND	9.56	9.7	ND	ND	ND	10.35	10.21	ND	ND
1995Q2	ND	9.05	8.81	ND	ND	ND	9.63	9.12	ND	ND
1995Q3	ND	8.84	8.78	ND	ND	ND	9.31	9.13	ND	ND
1995Q4	ND	8.53	8.21	ND	ND	ND	9.2	8.52	ND	ND
1996Q1	ND	8.44	8	ND	ND	ND	9.11	8.44	ND	ND
1996Q2	ND	8.62	8.37	ND	ND	ND	9.09	8.8	ND	ND
1996Q3	ND	8.43	7.87	ND	ND	ND	8.91	8.32	ND	ND
1996Q4	ND	8.08	6.87	ND	ND	ND	8.59	7.32	ND	ND
1997Q1	7.02	7.9	6.72	ND	ND	7.33	8.41	7.37	ND	ND
1997Q2	7.15	8.01	6.74	ND	ND	7.45	8.41	7.47	ND	ND
1997Q3	6.68	7.62	6.31	ND	ND	6.96	8	6.86	ND	ND
1997Q4	6.48	7.22	5.98	ND	ND	6.78	7.57	6.57	ND	ND
1998Q1	6.17	6.77	5.8	ND	ND	6.54	7.19	6.41	ND	ND
1998Q2	6.17	6.35	5.72	ND	ND	6.54	7.02	6.2	ND	ND
1998Q3	6.13	6.12	5.94	ND	ND	6.66	7.01	6.58	ND	ND
1998Q4	5.66	5.77	5.6	ND	ND	6.38	6.58	6.43	ND	ND
1999Q1	5.79	5.38	5.69	ND	4.44	6.4	5.99	6.71	ND	4.75
1999Q2	6.35	5.84	5.78	1.94	4.61	6.91	6.64	6.8	2.6	5.02
1999Q3	6.81	6.49	6.36	2.12	5.54	7.41	7.45	7.12	2.67	5.98
1999Q4	6.95	6.56	6.91	2.03	5.78	7.58	7.39	7.59	2.45	6.38
2000Q1	7.54	6.67	6.9	1.94	6.09	8.11	7.32	7.96	2.35	6.73
2000Q2	7.52	6.56	6.72	1.9	5.95	8.27	7.31	7.84	2.25	6.93
2000Q3	7.27	6.48	6.49	1.99	6.02	7.92	7.29	7.38	2.29	6.86
2000Q4	6.99	6.09	6.36	1.92	5.89	7.74	6.93	7.41	2.22	7.13
2001Q1	6.25	5.78	5.94	1.55	5.49	7.16	6.55	7.71	1.81	6.93
2001Q2	6.38	6.03	6.26	1.43	5.7	7.2	6.68	7.69	1.7	6.93
2001Q3	6.16	5.97	6.29	1.47	5.53	7.01	6.64	7.57	1.76	7.11
2001Q4	5.85	5.59	6.16	1.4	5.15	6.85	6.42	7.5	1.78	6.7
2002Q1	6	5.72	6.2	1.55	5.48	7.29	6.41	7.46	2.01	6.75
2002Q2	6.14	5.88	6.29	1.48	5.62	7.39	6.38	7.44	1.86	7.01
2002Q3	5.58	5.59	5.84	1.33	5.23	7.04	6.15	7.06	1.63	6.81
2002Q4	5.14	5.39	5.7	1.09	4.95	6.66	6.14	6.97	1.44	6.61
2003Q1	4.83	4.8	5.59	0.87	4.51	6.18	5.87	6.69	1.17	5.88
2003Q2	4.38	4.76	5.31	0.7	4.3	5.41	5.76	5.98	0.94	5.09
2003Q3	4.96	5.11	5.37	1.4	4.46	5.83	5.8	5.82	1.58	5.15
2003Q4	4.96	5.43	5.39	1.47	4.6	5.66	6.05	5.74	1.59	5.16
2004Q1	4.7	5.28	5.07	1.41	4.39	5.34	5.94	5.39	1.56	4.99
2004Q2	5.3	5.68	5.42	1.69	4.57	5.93	6.32	5.81	1.85	5.15
2004Q3	4.97	5.6	5.16	1.69	4.43	5.59	6.18	5.79	1.81	4.9
2004Q4	4.81	5.19	4.96	1.65	4.04	5.28	5.73	5.6	1.69	4.46
2005Q1	4.94	5.11	4.87	1.55	3.87	5.36	5.64	5.42	1.6	4.29
2005Q2	4.88	4.97	4.65	1.39	3.63	5.4	5.66	5.19	1.47	4.2
2005Q3	4.93	4.78	4.42	1.56	3.5	5.4	5.49	4.85	1.65	3.88
2005Q4	5.24	4.78	4.56	1.63	3.7	5.79	5.54	5.09	1.75	4.1
2006Q1	5.36	4.6	4.67	1.77	3.89	5.86	5.33	5.18	1.89	4.39
2006Q2	5.92	5.08	4.99	2.03	4.42	6.42	5.76	5.51	2.17	4.93

Figure 7: Forward Earnings Yields on Equities

Data for Figure 7 immediately follows

Data for Figure 7

Date	OECD Weighted Average	OECD Weighted Average exc. Japan	AUSTRALIA	AUSTRIA	BELGIUM	CANADA	DENMARK	FINLAND	UK	US	France	Germany
1988Q1	9.09	10.89	12.17	-	12.23	10.15	7.01	10.61	11.64	9.96	15.01	9.35
1988Q2	9.00	10.71	10.69	-	9.50	10.20	7.81	10.32	12.18	10.16	12.35	8.85
1988Q3	8.58	10.22	10.86	-	9.72	10.55	7.79	10.03	11.52	10.35	10.79	8.95
1988Q4	8.43	10.01	13.14	6.51	9.38	10.83	8.36	11.47	11.51	10.26	10.00	8.13
1989Q1	8.50	10.07	13.59	-	14.67	10.37	7.75	10.30	11.39	10.30	9.67	9.40
1989Q2	8.48	10.00	13.47	-	8.02	10.28	7.84	10.66	11.28	9.75	10.34	9.84
1989Q3	7.83	9.19	12.71	8.54	9.30	9.19	7.38	10.69	10.25	8.94	10.35	7.68
1989Q4	7.73	9.08	12.03	5.42	9.31	8.66	7.25	11.25	10.55	8.65	9.80	7.82
1990Q1	8.03	9.30	12.01	-	-	9.35	7.74	10.91	10.28	9.29	9.78	6.99
1990Q2	8.33	9.58	12.16	-	9.40	9.52	7.92	10.82	11.51	9.00	10.40	7.47
1990Q3	8.04	9.17	10.84	4.53	10.86	8.92	8.12	9.55	11.06	9.08	10.40	6.93
1990Q4	8.65	9.76	12.30	5.64	11.25	8.74	8.65	10.44	11.10	9.22	11.49	8.07
1991Q1	8.00	9.20	11.17	-	-	8.45	10.61	-	9.63	8.61	10.89	7.69
1991Q2	7.28	8.34	8.67	9.62	10.34	7.95	7.36	7.45	9.06	8.13	9.81	7.64
1991Q3	6.99	7.94	8.89	6.02	10.05	7.40	6.46	4.65	8.84	7.72	9.59	7.05
1991Q4	6.74	7.65	8.15	5.86	10.00	6.59	6.34	1.95	8.44	7.33	9.35	7.04
1992Q1	6.86	7.78	7.55	-	9.42	7.13	6.42	3.08	8.67	7.45	9.37	6.93
1992Q2	7.06	7.89	7.18	6.17	9.74	7.81	7.16	4.88	8.14	7.71	8.95	6.88
1992Q3	7.17	8.14	8.23	5.86	9.83	7.23	7.70	5.24	8.86	7.49	9.54	7.44
1992Q4	6.50	7.42	8.99	5.18	9.18	7.16	6.42	-2.14	7.67	7.13	8.66	6.92
1993Q1	6.02	7.11	7.96	4.92	8.46	7.64	6.16	0.55	8.00	7.39	7.41	5.62
1993Q2	5.97	7.08	7.45	5.18	8.51	7.43	6.26	3.53	8.17	7.48	7.05	5.56
1993Q3	5.49	6.56	7.56	4.15	7.54	6.67	5.62	3.51	7.72	7.25	6.12	4.91
1993Q4	5.18	6.19	7.07	3.34	7.00	5.98	5.40	3.59	7.15	7.07	5.54	4.29
1994Q1	5.41	6.61	6.57	3.20	7.24	6.34	5.70	5.98	7.07	7.56	5.75	4.92
1994Q2	5.97	7.20	6.93	4.46	7.90	7.37	6.87	8.22	7.88	8.11	6.55	5.31
1994Q3	6.12	7.41	7.97	5.15	8.22	7.41	7.22	8.54	8.06	8.01	6.91	5.46
1994Q4	6.24	7.53	8.65	5.70	8.54	7.80	7.49	9.07	8.25	7.98	6.92	5.67
1995Q1	6.91	8.33	8.97	6.81	9.68	9.00	8.47	12.25	8.83	8.42	8.03	6.66
1995Q2	7.00	8.25	8.30	7.20	9.55	8.57	8.71	14.66	8.60	8.27	7.82	6.68
1995Q3	6.58	7.80	8.38	7.02	9.20	8.31	8.68	14.76	8.18	7.79	7.65	5.89
1995Q4	6.41	7.60	8.48	7.31	8.97	8.33	8.76	16.45	7.92	7.24	7.26	5.97
1996Q1	6.45	7.51	7.95	7.01	8.46	8.01	8.71	13.89	7.88	7.29	7.08	6.05
1996Q2	6.36	7.26	7.53	6.56	8.18	7.68	7.97	11.40	7.94	7.14	6.51	6.08
1996Q3	6.29	7.20	7.88	7.10	8.08	7.55	7.42	10.17	7.93	6.97	6.56	6.03
1996Q4	5.82	6.60	7.28	6.72	7.64	6.51	6.91	8.46	7.61	6.35	5.87	5.79
1997Q1	5.77	6.40	6.91	6.87	7.15	6.60	6.19	7.76	7.39	6.32	5.72	5.50
1997Q2	5.67	6.29	6.64	7.24	6.94	6.78	6.16	7.89	7.13	6.25	5.74	5.32
1997Q3	5.12	5.61	6.76	6.78	6.61	6.06	5.57	6.53	6.54	5.53	5.29	4.70
1997Q4	5.15	5.58	7.06	7.11	6.69	5.87	5.52	6.99	6.32	5.34	5.56	4.90
1998Q1	5.10	5.47	6.38	7.04	6.24	5.99	5.32	6.96	6.07	5.36	5.43	4.76
1998Q2	4.75	5.05	6.08	6.65	5.39	5.66	5.13	5.36	5.69	5.06	4.76	4.32
1998Q3	4.80	5.12	6.39	7.54	4.86	6.07	5.39	5.58	5.78	4.99	4.75	4.37
1998Q4	4.90	5.24	6.38	8.50	5.14	5.94	6.14	5.89	5.79	4.81	5.13	5.22
1999Q1	4.49	4.89	5.45	7.82	4.84	5.67	6.00	4.41	5.24	4.56	4.73	5.01
1999Q2	4.41	4.85	4.99	8.01	5.41	5.42	5.72	4.00	5.22	4.51	4.72	5.00
1999Q3	4.36	4.76	5.36	7.88	5.66	5.17	5.29	3.73	5.30	4.45	4.49	4.62
1999Q4	4.19	4.56	5.70	8.18	5.73	4.88	4.86	2.99	5.14	4.31	4.16	4.10
2000Q1	4.20	4.62	5.51	9.22	7.35	4.39	4.70	2.14	5.45	4.54	3.87	3.65
2000Q2	4.43	4.80	5.87	9.51	7.41	4.80	4.75	2.30	5.50	4.62	3.92	4.29
2000Q3	4.37	4.65	5.92	9.24	7.14	4.36	4.35	2.71	5.23	4.41	3.87	4.36
2000Q4	4.53	4.76	6.15	8.83	7.41	5.27	4.55	3.18	5.14	4.41	4.26	4.46
2001Q1	5.09	5.32	6.09	8.23	8.12	6.56	5.62	4.86	5.74	4.91	5.10	4.95
2001Q2	5.21	5.41	5.89	7.99	8.62	6.85	6.31	4.95	6.04	4.88	5.11	5.40
2001Q3	5.55	5.76	6.50	8.35	8.59	6.83	6.48	6.04	6.22	5.08	5.42	5.97
2001Q4	4.94	5.09	6.41	7.06	8.08	5.66	6.54	4.34	4.36	4.61	5.17	4.96
2002Q1	5.22	5.48	6.08	7.98	8.27	6.13	6.65	4.38	4.53	5.12	5.43	5.32
2002Q2	5.64	5.90	6.31	8.18	8.22	6.74	6.81	5.93	4.83	5.67	5.80	5.89
2002Q3	6.65	6.95	7.17	10.14	10.30	7.79	7.63	7.30	5.69	6.54	7.22	7.39
2002Q4	6.54	6.73	7.56	10.46	10.30	7.43	7.99	6.10	5.49	6.27	7.05	7.43
2003Q1	7.16	7.43	7.52	9.81	11.54	7.75	8.90	7.03	6.14	6.66	7.88	9.19
2003Q2	6.93	7.06	6.98	9.68	10.43	7.69	8.20	6.71	5.76	6.38	7.57	8.48
2003Q3	6.36	6.51	7.15	8.56	9.60	6.95	7.42	6.10	5.54	6.03	6.78	7.05
2003Q4	6.14	6.25	7.32	8.11	9.22	6.49	6.97	5.69	5.44	5.76	6.53	6.61
2004Q1	6.28	6.42	7.08	7.43	8.97	6.70	6.98	5.79	5.62	5.89	6.76	7.09
2004Q2	6.73	6.88	7.12	7.61	9.05	7.49	7.14	7.02	5.93	6.39	7.21	7.78
2004Q3	6.96	7.08	7.39	7.69	8.89	7.63	6.85	6.95	6.17	6.51	7.54	8.24
2004Q4	6.77	6.81	7.28	7.47	8.23	7.33	6.88	6.49	5.98	6.24	7.54	7.82
2005Q1	6.88	6.97	7.03	7.70	8.11	7.24	6.72	6.91	6.18	6.53	7.70	8.09
2005Q2	7.53	7.62	7.28	8.32	8.62	7.66	7.18	7.25	8.42	6.82	8.56	9.00
2005Q3	7.24	7.34	7.20	7.38	8.33	7.11	6.86	6.84	8.12	6.71	8.16	8.36
2005Q4	7.14	7.38	7.50	8.67	8.31	7.29	6.96	6.52	8.27	6.75	8.21	8.06
2006Q1	7.10	7.37	7.02	8.02	8.28	7.10	7.15	6.44	8.07	6.88	8.05	7.87
2006Q2	7.59	7.84	7.06	8.17	8.94	7.48	7.12	7.27	8.47	7.28	8.64	8.63
2006Q3	7.67	7.88	7.79	8.58	8.90	7.53	7.07	7.73	8.69	7.19	8.69	8.78
2006Q4	7.06	7.22	7.33	7.57	8.26	6.94	6.40	7.21	8.15	6.61	7.97	7.84
2007Q1	-	-	6.92	7.79	8.36	7.02	6.59	7.33	8.23	6.88	-	-
2007Q2	-	-	6.52	8.09	8.48	6.81	6.55	7.01	8.07	6.79	-	-
2007Q3	-	-	6.98	8.78	9.20	6.69	6.53	6.79	8.51	6.90	-	-

Data for Figure 7 continued

Date	Greece	Ireland	Italy	Japan	Netherlands	NZ	Norway	Portugal	Spain	Sweden	Switzerland
1988Q1	-	-	11.61	2.21	11.47	21.68	16.59	-	9.73	11.21	13.30
1988Q2	-	-	12.68	2.45	10.99	17.10	17.26	-	10.05	11.86	13.15
1988Q3	-	-	8.50	2.30	11.00	14.56	17.49	-	9.16	10.51	10.19
1988Q4	-	-	8.00	2.35	11.15	14.22	14.84	-	9.16	10.24	8.98
1989Q1	-	-	7.17	2.16	11.17	14.77	12.01	-	8.36	10.21	8.37
1989Q2	-	-	8.98	2.40	-	13.96	11.26	-	10.09	10.24	8.44
1989Q3	-	-	8.16	2.34	10.76	12.44	12.16	-	10.02	9.29	8.88
1989Q4	-	-	8.53	2.32	11.03	12.70	13.04	-	10.03	9.89	9.72
1990Q1	-	-	7.89	2.33	11.64	12.90	10.62	-	-	8.46	9.32
1990Q2	-	-	11.38	2.72	11.07	13.09	10.19	-	10.26	9.33	10.14
1990Q3	-	10.99	8.22	2.91	10.69	13.08	9.68	-	10.65	8.10	11.08
1990Q4	-	12.03	9.39	3.62	11.34	15.66	10.07	-	12.47	10.60	11.88
1991Q1	-	9.62	9.00	3.05	12.83	15.71	9.98	-	11.91	9.91	10.04
1991Q2	-	9.20	6.63	2.93	10.33	12.81	9.99	-	9.35	8.94	8.40
1991Q3	-	9.56	7.24	3.06	10.31	12.89	9.17	10.21	7.92	8.35	8.10
1991Q4	-	9.34	6.73	2.97	10.19	11.84	9.71	10.16	9.16	8.05	8.43
1992Q1	-	9.56	6.39	3.15	10.17	10.47	9.29	13.87	10.94	7.66	8.55
1992Q2	-	9.80	7.06	3.71	9.81	8.93	9.25	15.37	11.28	7.58	8.75
1992Q3	-	11.67	7.60	3.24	10.11	9.29	10.57	12.93	12.94	8.45	9.38
1992Q4	-	11.95	5.48	2.74	9.12	10.02	8.18	12.31	12.81	6.00	8.88
1993Q1	-	10.25	3.98	2.30	8.81	8.81	8.36	12.95	11.57	5.57	8.29
1993Q2	-	9.22	4.30	2.16	8.60	8.25	8.68	4.90	9.78	6.31	8.19
1993Q3	-	8.11	3.55	1.82	7.91	7.96	7.24	-6.22	7.93	5.67	7.65
1993Q4	-	7.88	3.49	1.69	7.36	7.54	6.83	-6.48	7.27	5.42	7.20
1994Q1	-	7.98	4.15	1.44	7.53	6.47	7.00	0.47	7.11	6.70	6.96
1994Q2	-	9.27	4.15	1.86	8.22	6.90	7.90	-	7.98	8.14	7.84
1994Q3	10.64	9.20	4.92	1.77	8.71	8.09	8.31	-	8.95	9.10	8.45
1994Q4	9.90	9.94	5.59	1.88	8.88	8.71	9.03	-	9.00	9.02	8.20
1995Q1	13.12	11.34	6.33	2.11	9.77	9.19	10.70	10.46	10.73	10.72	8.77
1995Q2	12.33	11.73	6.74	2.80	9.81	8.60	11.72	10.14	10.81	11.20	8.24
1995Q3	11.35	10.63	6.85	2.48	9.34	9.30	11.28	10.25	9.88	10.03	7.30
1995Q4	12.70	10.06	7.55	2.40	9.14	9.80	11.90	10.28	10.11	10.03	6.64
1996Q1	11.28	9.95	7.43	2.26	8.28	9.15	11.91	9.72	9.86	9.65	6.82
1996Q2	12.16	8.43	7.12	2.81	7.61	7.50	11.04	9.12	9.23	8.54	6.52
1996Q3	11.20	8.55	7.66	2.70	7.67	7.68	10.31	8.10	9.36	8.25	6.56
1996Q4	11.30	8.02	6.93	2.73	6.91	7.26	9.39	7.58	8.19	7.12	6.25
1997Q1	9.17	8.23	6.42	3.06	6.43	7.04	8.66	7.31	7.19	6.42	6.21
1997Q2	7.72	8.08	6.46	3.03	6.19	6.61	8.62	6.78	6.63	6.38	5.73
1997Q3	7.69	7.30	5.38	3.00	5.43	6.50	7.57	5.84	5.87	5.60	5.19
1997Q4	8.33	7.21	5.16	3.31	5.87	7.16	7.72	5.67	5.89	6.03	5.29
1998Q1	7.82	6.60	4.72	3.32	5.83	7.04	8.53	5.05	5.28	6.18	5.12
1998Q2	6.22	6.43	4.25	3.31	5.36	6.71	7.89	4.62	4.62	5.61	4.88
1998Q3	6.54	7.31	4.52	3.23	5.70	7.73	9.12	4.95	4.93	5.90	4.91
1998Q4	7.41	7.66	5.01	3.20	5.38	7.74	10.20	5.73	5.30	6.29	5.36
1999Q1	5.57	6.68	4.56	2.71	4.84	6.60	8.28	5.60	4.93	5.61	5.04
1999Q2	5.24	6.95	4.70	2.45	4.85	6.00	7.83	6.15	5.13	5.39	5.28
1999Q3	4.55	6.84	4.77	2.56	4.74	6.58	7.19	6.43	5.39	4.93	5.32
1999Q4	4.19	6.66	4.56	2.54	4.83	7.62	7.28	5.99	5.09	4.17	5.16
2000Q1	5.09	8.05	3.91	2.47	4.97	7.93	7.82	5.14	5.14	3.32	5.76
2000Q2	6.20	7.73	4.23	2.85	5.03	7.96	8.65	5.98	5.62	3.85	5.64
2000Q3	6.07	8.52	4.16	3.23	5.14	7.74	8.17	5.80	5.41	3.81	5.52
2000Q4	6.05	7.04	4.33	3.57	5.52	8.35	8.74	6.09	5.81	4.39	5.62
2001Q1	7.13	6.86	5.07	4.01	6.24	7.81	8.40	6.30	6.26	5.53	6.02
2001Q2	7.42	6.97	5.40	4.20	5.99	6.81	8.72	7.08	6.48	5.91	6.00
2001Q3	9.17	7.31	6.29	4.57	6.46	7.07	9.73	7.97	7.68	5.88	6.14
2001Q4	7.50	7.30	5.67	4.20	6.23	6.61	8.73	6.74	7.01	4.66	6.11
2002Q1	7.96	7.99	5.81	3.79	6.12	6.17	9.01	6.70	7.01	5.13	6.25
2002Q2	7.83	8.35	5.85	4.27	6.32	6.34	8.91	6.91	6.86	5.71	6.16
2002Q3	8.14	10.04	6.88	5.02	8.16	7.66	10.01	8.04	8.12	6.78	7.25
2002Q4	8.68	9.39	6.51	5.53	7.85	8.21	9.63	7.83	7.79	6.49	6.67
2003Q1	10.18	9.88	6.96	5.66	9.18	8.08	10.80	7.67	8.14	7.56	7.70
2003Q2	9.28	9.17	6.75	6.21	8.78	7.41	9.81	7.97	7.88	7.65	7.05
2003Q3	7.78	8.67	6.54	5.53	7.86	7.36	8.40	7.38	7.46	6.61	6.44
2003Q4	7.63	8.64	6.25	5.55	7.68	7.48	8.26	6.71	7.40	6.32	6.29
2004Q1	7.37	8.56	6.66	5.47	7.73	7.14	7.88	6.78	7.39	6.39	6.52
2004Q2	7.82	7.96	6.93	5.85	8.17	6.97	8.45	7.28	7.83	7.08	6.84
2004Q3	8.21	7.89	7.09	6.28	8.47	7.08	8.78	7.36	8.13	7.59	7.21
2004Q4	7.37	7.41	6.72	6.52	8.34	6.99	8.92	7.06	7.67	7.10	7.11
2005Q1	7.00	7.48	6.64	6.34	8.00	6.64	8.26	7.50	7.64	7.29	7.13
2005Q2	7.79	8.38	7.58	6.95	8.88	6.98	8.64	8.55	8.46	7.72	7.62
2005Q3	7.31	7.98	7.39	6.68	8.59	6.69	7.25	8.43	7.95	7.16	7.20
2005Q4	7.01	7.99	7.69	5.71	8.22	7.18	8.29	7.78	7.91	7.13	6.67
2006Q1	6.98	7.59	7.73	5.30	8.09	7.05	8.31	7.10	8.11	7.06	6.79
2006Q2	7.82	8.16	8.38	5.85	8.80	6.95	8.92	7.28	8.72	7.76	7.40
2006Q3	8.18	8.30	8.56	6.22	8.63	7.64	9.58	7.32	8.56	8.17	7.23
2006Q4	7.50	7.61	7.91	5.97	7.92	7.10	8.82	6.72	7.44	7.08	6.70
2007Q1	-	-	-	-	-	-	-	-	-	-	-
2007Q2	-	-	-	-	-	-	-	-	-	-	-
2007Q3	-	-	-	-	-	-	-	-	-	-	-

Figure 8: Dynamic Simulations of Log Real Household Consumption

Data for Figure 8 immediately follows

Data for Figure 8

Date	US	UK	GERMANY	ITALY	JAPAN	CANADA	FRANCE
1995Q1	15.49582	13.18858	13.91112	13.35105	19.40456	13.06244	13.47263
1995Q2	15.50407	13.19621	13.92654	13.35279	19.41875	13.06992	13.48521
1995Q3	15.51274	13.20686	13.92538	13.35839	19.42353	13.07973	13.47883
1995Q4	15.51955	13.21352	13.92455	13.35834	19.43064	13.07948	13.47864
1996Q1	15.52834	13.22497	13.9275	13.36317	19.43662	13.09203	13.49553
1996Q2	15.53915	13.23312	13.93298	13.36376	19.44272	13.09285	13.48998
1996Q3	15.54552	13.24255	13.93676	13.36059	19.44297	13.09595	13.49908
1996Q4	15.5538	13.25443	13.93731	13.37119	19.45409	13.11258	13.4878
1997Q1	15.56455	13.25577	13.94296	13.37196	19.47459	13.12861	13.48662
1997Q2	15.56919	13.2741	13.94714	13.3974	19.43795	13.13781	13.49032
1997Q3	15.58548	13.2743	13.93792	13.40403	19.44706	13.14986	13.49551
1997Q4	15.59577	13.28785	13.94559	13.40914	19.44625	13.15759	13.50864
1998Q1	15.60674	13.29716	13.9521	13.41612	19.43971	13.15805	13.5169
1998Q2	15.6225	13.30699	13.94964	13.42434	19.43549	13.17035	13.52838
1998Q3	15.63451	13.31748	13.95847	13.43485	19.44655	13.17603	13.53477
1998Q4	15.6479	13.32506	13.96762	13.44296	19.44936	13.17859	13.54156
1999Q1	15.65785	13.33992	13.98215	13.44691	19.44804	13.19278	13.54666
1999Q2	15.67332	13.34962	13.97603	13.45438	19.45216	13.20201	13.55634
1999Q3	15.68372	13.35789	13.98412	13.46059	19.45403	13.21375	13.56878
1999Q4	15.69601	13.37619	13.99796	13.45769	19.45683	13.22354	13.5794
2000Q1	15.71183	13.39684	13.99794	13.47358	19.46059	13.23375	13.58998
2000Q2	15.71811	13.39706	14.01537	13.4753	19.45828	13.24234	13.59723
2000Q3	15.72772	13.40399	14.01489	13.47807	19.45639	13.25553	13.59928
2000Q4	15.7361	13.40622	14.00963	13.48635	19.46532	13.25826	13.60331
2001Q1	15.74021	13.41826	14.02335	13.48601	19.4742	13.26551	13.61322
2001Q2	15.74272	13.42453	14.0321	13.48756	19.47907	13.26676	13.61909
2001Q3	15.7471	13.43565	14.03465	13.48331	19.47402	13.26837	13.62589
2001Q4	15.76393	13.44316	14.02478	13.48515	19.47812	13.27908	13.62999
2002Q1	15.76743	13.45507	14.01684	13.48306	19.47918	13.29222	13.63451
2002Q2	15.77328	13.462	14.01967	13.4823	19.4873	13.30468	13.64237
2002Q3	15.77887	13.46739	14.02521	13.48758	19.493	13.30699	13.65191
2002Q4	15.78237	13.47326	14.02266	13.49587	19.48953	13.31814	13.65499
2003Q1	15.78749	13.47958	14.01746	13.49343	19.48885	13.32336	13.65874
2003Q2	15.79642	13.49213	14.02345	13.49734	19.4875	13.33159	13.66323
2003Q3	15.81061	13.49768	14.02152	13.49915	19.48903	13.34164	13.67181
2003Q4	15.81622	13.50256	14.01902	13.49792	19.49994	13.343	13.67637
2004Q1	15.82772	13.51455	14.01659	13.50517	19.50652	13.35681	13.68332
2004Q2	15.83499	13.52605	14.01475	13.50337	19.50855	13.36165	13.69052
2004Q3	15.84459	13.52974	14.01545	13.50191	19.51048	13.37088	13.69106
2004Q4	15.85505	13.53426	14.02329	13.50476	19.50383	13.38003	13.70304
2005Q1	15.86183	13.53684	14.0189	13.50309	19.5122	13.39365	13.70729
2005Q2	15.87217	13.53677	14.01932	13.50971	19.52187	13.4021	13.70673
2005Q3	15.88178	13.54123	14.02514	13.51432	19.52719	13.40845	13.71532
2005Q4	15.88366	13.54632	14.01754	13.51283	19.52997	13.41729	13.72138
2006Q1	15.89543	13.54766	14.02572	13.5182	19.53038	13.43033	13.72949
2006Q2	15.9018	13.55901	14.02456	13.52236	19.5358	13.43953	13.73592
2006Q3	15.90876	13.56233	14.03233	13.52792	19.52503	13.45186	13.74172
2006Q4	15.91914	13.57295	14.03612	13.53014	19.53535	13.45957	13.7464

Figure 9: Change in Current Accounts 1996 - 2005*

Data for Figure 9 immediately follows

* 2004 for Greece and 2003 for Portugal.

Data for Figure 9

Country	Dates	CA/GDP	I/Y	I/Y: Fixed Investment: Housing	I/Y: Fixed Investment: Non-Housing	S/Y	S/Y: Private: Household	S/Y: Private: Corporate	S/Y: Public
Spain	1996 - 2005	-0.0713	-0.0783	-0.0409	-0.0374	-0.0028	-0.0319	-0.0350	0.0641
Italy	1996 - 2005	-0.0474	-0.0148	-0.0019	-0.0129	-0.0173	-0.0600	0.0135	0.0293
USA	1996 - 2005	-0.0447	-0.0091	-0.0190	0.0100	-0.0257	-0.0169	0.0021	-0.0109
Greece	1996 - 2004	-0.0290	-0.0466	-0.0063	-0.0402	-0.0160	-0.0540	0.0042	0.0338
Portugal	1996 - 2003	-0.0263	0.0069	0.0028	0.0041	-0.0327	-0.0049	-0.0220	-0.0058
France	1996 - 2005	-0.0235	-0.0259	-0.0043	-0.0216	-0.0036	0.0001	-0.0075	0.0038
Australia	1996 - 2005	-0.0210	-0.0365	-0.0159	-0.0205	0.0168	-0.0482	0.0222	0.0428
UK	1996 - 2005	-0.0159	-0.0034	-0.0099	0.0065	-0.0107	-0.0307	0.0109	0.0092
Finland	1996 - 2005	0.0089	-0.0376	-0.0190	-0.0186	0.0427	-0.0021	0.0003	0.0445
Canada	1996 - 2005	0.0148	-0.0334	-0.0177	-0.0157	0.0476	-0.0582	0.0638	0.0420
Japan	1996 - 2005	0.0222	0.0555	0.0193	0.0362	-0.0336	-0.0485	0.0555	-0.0406
Denmark	1996 - 2005	0.0236	-0.0178	-0.0167	-0.0011	0.0386	-0.0342	0.0073	0.0656
Netherlands	1996 - 2005	0.0254	0.0236	-0.0061	0.0298	-0.0099	-0.0403	0.0113	0.0192
Sweden	1996 - 2005	0.0342	-0.0071	-0.0122	0.0051	0.0318	0.0073	-0.0261	0.0507
Austria	1996 - 2005	0.0440	0.0198	0.0229	-0.0031	0.0130	0.0018	0.0004	0.0109
Germany	1996 - 2005	0.0517	0.0396	0.0232	0.0164	0.0033	-0.0007	0.0073	-0.0033

Figure 10: Level of Current Accounts in 1996

Data for Figure 10 immediately follows

Data for Figure 10

Country	CA/GDP	I/Y	I/Y: Fixed Investment: Housing	I/Y: Fixed Investment: Non-Housing	S/Y	S/Y: Private: Household	S/Y: Private: Corporate	S/Y: Public
Australia	-0.04	-0.23	-0.05	-0.18	0.20	0.10	0.12	-0.02
Portugal	-0.03	-0.24	-0.12	-0.11	0.20	0.08	0.13	-0.01
Austria	-0.02	-0.23	-0.07	-0.16	0.21	0.09	0.12	0.01
Greece	-0.02	-0.21	-0.09	-0.12	0.15	0.11	0.09	-0.05
USA	-0.02	-0.19	-0.04	-0.15	0.17	0.04	0.11	0.01
UK	-0.01	-0.17	-0.03	-0.14	0.16	0.07	0.11	-0.02
Germany	-0.01	-0.21	-0.08	-0.14	0.21	0.12	0.10	-0.01
Spain	0.00	-0.22	-0.05	-0.17	0.22	0.10	0.14	-0.01
Canada	0.01	-0.18	-0.05	-0.13	0.19	0.07	0.15	-0.03
France	0.01	-0.18	-0.04	-0.13	0.19	0.10	0.09	0.00
Japan	0.01	-0.29	-0.06	-0.23	0.30	0.11	0.16	0.03
Denmark	0.01	-0.19	-0.04	-0.15	0.21	0.01	0.22	-0.02
Italy	0.03	-0.19	-0.04	-0.15	0.21	0.17	0.08	-0.04
Sweden	0.04	-0.16	-0.02	-0.15	0.20	0.06	0.14	0.00
Finland	0.04	-0.17	-0.04	-0.13	0.21	0.05	0.16	0.01
Netherlands	0.05	-0.22	-0.06	-0.16	0.27	0.11	0.16	0.01

Figure 11: Level of Current Accounts in 2005*

Data for Figure 11 immediately follows

* 2004 for Greece and 2003 for Portugal.

Data for Figure 11

Country	CA/GDP	I/Y	I/Y: Fixed Investment: Housing	I/Y: Fixed Investment: Non-Housing	S/Y	S/Y: Private: Household	S/Y: Private: Corporate	S/Y: Public
Spain	-0.07	-0.30	-0.09	-0.21	0.22	0.07	0.10	0.05
Portugal	-0.06	-0.23	-0.12	-0.11	0.17	0.08	0.10	-0.01
USA	-0.06	-0.20	-0.06	-0.14	0.14	0.03	0.12	0.00
Australia	-0.06	-0.27	-0.07	-0.20	0.22	0.05	0.14	0.03
Greece	-0.05	-0.25	-0.10	-0.16	0.14	0.05	0.10	-0.01
UK	-0.02	-0.17	-0.04	-0.13	0.15	0.04	0.12	-0.01
Italy	-0.02	-0.21	-0.04	-0.17	0.19	0.10	0.08	0.01
France	-0.01	-0.20	-0.05	-0.16	0.19	0.10	0.08	0.00
Canada	0.02	-0.22	-0.07	-0.15	0.24	0.01	0.21	0.01
Austria	0.02	-0.21	-0.04	-0.16	0.22	0.09	0.12	0.02
Denmark	0.02	-0.23	-0.06	-0.17	0.25	0.02	0.19	0.04
Japan	0.04	-0.23	-0.04	-0.20	0.26	0.06	0.22	-0.01
Germany	0.05	-0.17	-0.05	-0.12	0.21	0.12	0.11	-0.01
Finland	0.05	-0.21	-0.06	-0.15	0.27	0.04	0.18	0.06
Sweden	0.07	-0.17	-0.03	-0.14	0.23	0.06	0.12	0.05
Netherlands	0.08	-0.19	-0.06	-0.13	0.26	0.07	0.17	0.03

Footnotes

* The views in this paper are solely the responsibility of the authors and should not be interpreted as reflecting the views of the Board of Governors of the Federal Reserve System or of any other person associated with the Federal Reserve System. We would like to thank Ravi Balakrishnan, Joseph Gagnon, Chris Gust, Trevor Reeve, Rob Vigfusson, and participants in the International Finance Workshop for helpful comments and advice. William DeHaven provided excellent research assistance. Corresponding author: Tel: +1 202 452 3339; E mail:[email protected] Return to text

1. In regressions similar to those reported here, Chinn and Ito (2007a, 2007b) generally do not find measures of financial development such as private credit/GDP, by themselves, to be significant determinants of current account balances. In both papers, Chinn and Ito do report significant results when measures of financial development are interacted with institutional variables, including a measure of legal development and an index of financial market openness. However, their results suggest that financial development leads to lower current account balances only in industrial economies, not developing ones. Moreover, it is unclear from their results whether these interactions between financial development and other structural characteristics importantly explain the developing country surpluses and large U.S. deficit. Return to text

2. This finding is consistent with Chinn and Ito's (2007a, 2007b) findings that in many developing countries, including in Asia, greater financial development is associated with higher, not lower, current account balances. Return to text

3. Examining a similar sample, Mendoza, Quadrini, and Rios-Rull (2007) report that private credit/GDP is significantly negatively correlated with the current account balance, controlling for the level of per capita GDP. When we reproduced that regression, we found that the U.S. current account deficit again remained a significant outlier, suggesting that the variable does not explain the large U.S. imbalance. Return to text

4. The four-quarter inflation rate in a given quarter is the percent change in the CPI in that quarter relative to its level four quarters earlier. We view this as a reasonable proxy for inflation expectations, insofar as these data are averaged over multi-year periods to compute the real inflation differentials which enter into the panel regressions. Return to text

5. Boileau and Normandin (2008) find interest rates to be negatively correlated with current account balances, the opposite of our finding. However, their estimate is based on bivariate correlations using quarterly data, and hence may be capturing short-term demand effects--demand shocks may simultaneously raise interest rates and reduce current account surpluses--that are precluded by our period-average data with controls for output growth and fiscal policy. In an estimated model of real long-term interest rates, Orr, Edey, and Kennedy (1995) also find a negative correlation between interest rates and current account balances, but their model, again, lacks many of the control variables present in our equation. Return to text

6. Orr, Edey, and Kennedy (1995) argue that the most common explanation for real interest rate differentials is the existence of financial risk premia. Accordingly, small or negligible real interest rate differentials suggest the absence of negative or positive financial risk premia. Return to text

7. Balakrishnan, Bayoumi, and Tulin (2007) also decompose the sources of financing for the U.S. current account deficit and find that declining home bias and financial deepening (increases in investor portfolios) account for most of this financing, rather than an increase in the share of U.S. assets in foreign portfolios. Although they acknowledge a large residual in their calculations, their findings represent further evidence against the view that an increase in preferences for U.S. assets explains the widening deficit. Return to text

8. It might be thought that even if U.S. assets did command a low risk premia, its interest rates might not be lower than those in other countries, because additional issuance of U.S. assets in response to low interest rates might drive that premium back up. Indeed, in principle, a country experiencing a decline in its risk premium--and hence a decline in interest rates--might be encouraged to spend more and borrow more, thus increasing its liabilities and pushing interest rates back up. However, it is unlikely that interest rates would be pushed back all the way to their original level, as that would imply that the country had a perfectly flat demand curve for borrowed funds (that is, a willingness to borrow all the funds offered at a given interest rate). Return to text

9. Complete data for these countries are only available for 2005; see appendix for sources. Changes in the components of saving and investment do not always sum to changes in the current account balance owing to the statistical discrepancy. Return to text

10. $^{ }$ Loeys, Mackie, Meggyesi, and Panigirtzoglou (2005) argue that corporations were the primary force behind the global saving glut, and attribute the high rate of corporate saving to a desire to repair previously over-extended balance sheets. Return to text

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