Appendix 2: Regression Equations | RDP 9104: Cross-Country Relationship Between Interest Rates and Inflation over Three Decades

RDP 9104: Cross-Country Relationship Between Interest Rates and Inflation over Three Decades Appendix 2: Regression Equations^[a]

Michele Bullock and Mark Rider

June 1991

Period	Dependent Variable	a	b	R²
1961–1969	Nominal	1.08	1.07^*	0.55
	Real	1.08 (1.17)	0.07 (0.32)	0.01
1970–1972	Nominal	4.37^*	0.24	0.10
	Real	4.37^* (1.22)	−0.76^* (0.21)	0.53
1973–1974	Nominal	4.89^*	0.35^*	0.24
	Real	4.89^* (1.83)	−0.65^* (0.17)	0.53
1975–1979	Nominal	2.51^*	0.60^*	0.79
	Real	2.51^* (0.85)	−0.40^* (0.08)	0.63
1973–1979	Nominal	2.30^*	0.62^*	0.72
	Real	2.30^* (1.04)	−0.38^* (0.10)	0.50
1980–1983	Nominal	5.03^*	0.74^*	0.79
	Real	5.03^* (1.01)	−0.26^* (0.10)	0.32
1984–1989^b	Nominal	2.75^*	1.49^*	0.93
	Real	2.75^* (0.53)	0.49^* (0.10)	0.59
Government security yields (12 countries only)
1984–1989	Nominal	3.18^*	1.39^*	0.90
	Real	3.18^* (0.67)	0.39^* (0.15)	0.41

Period	Dependent Variable	a	b	R²
1961–1969	Nominal	3.96^*	0.52^*	0.27
	Real	3.96^* (0.87)	−0.48^* (0.24)	0.24
1970–1972	Nominal	6.62^*	0.15	0.02
	Real	6.62^* (1.50)	−0.85^* (0.24)	0.45
1973–1974	Nominal	5.50^*	0.32	0.16
	Real	5.50^* (2.11)	−0.68^* (0.19)	0.46
1975–1979	Nominal	4.13^*	0.58^*	0.66
	Real	4.13^* (1.09)	−0.42^* (0.11)	0.51
1973–1979	Nominal	3.71^*	0.58^*	0.57
	Real	3.71^* (1.34)	−0.42^* (0.13)	0.41
1980–1983	Nominal	5.53^*	0.72^*	0.70
	Real	5.53^* (1.26)	−0.28^* (0.12)	0.26
1984–1989^b	Nominal	4.75^*	1.14^*	0.87
	Real	4.75^* (0.57)	0.14 (0.11)	0.09
b New Zealand data on inflation (and hence the real interest rate) is adjusted for the GST in this period.

Period	Dependent Variable	a	b	R²
Including New Zealand
1984–1989	Change in inflation	1.11 (2.45)	−0.52 (0.47)	0.07
Excluding New Zealand
1984–1989	Change in inflation	3.37 (2.45)	−1.04^* (0.49)	0.23

Numbers in brackets are standard errors. A * indicates that the coefficient is significant at the 5 per cent level. [a]