Based on the model shown in Table 3, Column 5, Fig. 2 performs two functions: First, the
lines connecting the squares and diamonds compare the model’s prediction of the path of the U.S. current account with its actual values for all four periods; the model-fitted predictions are represented by black squares and the actual values by blue diamonds. (The results for the 1982-1986 and 1987-1991 periods are based on the coefficients estimated over the 1992-1996 and 1997-2003 periods, with the institutions measure fixed at its 1992-1996
period level and the period fixed effect set to zero.)