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