A Comparison Of Capital Formation In Industrialized Countries

Abstract

Capital formation in other industrialized nations requires our attention particularly because of the volatile changes in Europe and the Soviet Union. Using the multiple regression technique on data drawn from International Financial Statistics from 1976 through 1990, this study compares the impact of economic variables namely GNP, money supply, short- and long-term interest rates on capital formation in eight industrialized countries. The Changes in GNP, followed by long term interest rate and money supply, have a greater impact on capital formation than cost of funds as represented by short-term interest rates.