This paper investigates the determinants of real interest rates at world and country level. The starting point is the idea that real interest rates re°ect the interaction of desired saving and planned investment, using the framework developed by Barro and Sala-i-Martin (1990) and Barro (1992). The paper updates previous results and extends the analysis to study long real interest rates. We analyse which factors have been responsible for real rate `regime shifts' during 1959 to 1992. We examine the determinants of interest rate di®erentials across ten major industrialised countries and provide estimates of the extent of capital market integration.