VOLUME III
SPRING 1995

SHORT TERM REAL INTEREST RATE DETERMINANTS IN SPAIN
 
JOSÉ MANUEL NOCITO
PABLO COTO
JOSÉ MARÍA SARABIA

Universidad de Cantabria
 
In this paper a reduced-form real short term interest rate equation is estimated, derived from an IS-LM model in an open economy with a government sector and imperfect capital mobility. We use Spanish quarterly data for the period 1978(I)-1992(IV). The evidence shows that, in the short run, interest rates are positive and significantly related with public deficit and nominal short term foreign interest rates, and negative with real money supply and real exchange rates.
 
Keywords: real interest rates, short term, IS-LM model, public deficit, real exchange rate, foreign interest rates.

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