Reexamining the term structure of interest rates and the interwar demand for money
This paper reexamines whether the term structure of interest rates, rather than merely a single interest rate, should be included in the demand for money of the interwar era. In contrast to earlier work, we use cointegration techniques to model the equilibrium/error correction process, and find that a sufficiently rich dynamic model using a single interest rate has considerable explanatory power. Nevertheless, we conclude that the inclusion of the term structure may help to explain the turbulent monetary dynamics of the Depression era. Copyright Springer 1998
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Volume (Year): 22 (1998)
Issue (Month): 2 (June)
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References listed on IDEAS
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- R. W. Hafer, 1983. "The stability of the short-run money demand function, 1920-1939," Working Papers 1982-009, Federal Reserve Bank of St. Louis.
- Friedman, Milton, 1977. " Time Perspective in Demand for Money," Scandinavian Journal of Economics, Wiley Blackwell, vol. 79(4), pages 397-416.
- Nelson, Charles R & Siegel, Andrew F, 1987. "Parsimonious Modeling of Yield Curves," The Journal of Business, University of Chicago Press, vol. 60(4), pages 473-489, October.
- Milton Friedman & Anna J. Schwartz, 1963. "A Monetary History of the United States, 1867–1960," NBER Books, National Bureau of Economic Research, Inc, number frie63-1.
- Baum, Christopher F & Thies, Clifford F, 1992. "On the Construction of Monthly Term Structures of U.S. Interest Rates, 1919-1930," Computer Science in Economics & Management, Kluwer;Society for Computational Economics, vol. 5(3), pages 221-246, August. Full references (including those not matched with items on IDEAS)
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