Domestic and External Factors in the Determination of the Real Interest Rate: The Case of Uruguay

Abstract

The high level of the real interest rates in the 1980s is not a phenomenon limited to small countries. The United States and other industrial countries in Europe have been confronted with a similar experience. Although numerous studies have aimed to explain the level of real interest rates within the framework of developed countries, there is a lack of theoretical and empirical work about the determination of real interest rates in small, open developing countries and about the process of transmitting variations in the real interest rates across countries.