RBA Annual Conference – 2008 The Sub-prime Crisis: Causal Distortions and Regulatory Reform

Table 3: RMBS (Monthly) Model and Major Regulatory Structural Change
Dependant variable is the log of RMBS 1990–2003 1990–2007
Coeff t-value Coeff t-value Coeff t-value Coeff t-value
Constant c −16.94 −27.62   −25.32 −25.34 −18.47 −23.24 −18.26 −27.82
Log GDP 2.46 35.92   3.39 31.87 2.65 31.18 2.58 37.16
Fixed mortgage rate −0.024 −2.55   −0.027 −1.21 −0.044 −2.94 −0.021 −1.75
Spread to federal funds rate 0.046 9.91   −0.014 −1.38 0.032 4.44 0.029 5.07
12-months-ended house price inflation 1.81 3.09   −2.45 −3.92 2.21 4.32 1.24 2.87
S&L crisis dummy 1989–1993 −0.24 −22.81   −0.079 −3.89 −0.184 −12.41 −0.18 −15.11
Basel I excess capital/total assets 2.65 2.32   14.01 5.37 4.58 2.48 na na
Basel II adjusted excess capital/total assets na na   na na na na 10.91 10.24
Fannie/Freddie balance sheet constraint dummy na na   na na 0.675 16.02 0.444 10.63
Durban-Watson statistic   0.37     0.06   0.27   0.36
Restricted error correlation test for co-integration −0.096 −3.87   0.011 0.99 −0.022 −1.77 −0.038 −2.58

Source: OECD