IDEAS home Printed from https://ideas.repec.org/a/spr/jecfin/v22y1998i2p5-12.html
   My bibliography  Save this article

Reexamining the term structure of interest rates and the interwar demand for money

Author

Listed:
  • Christopher Baum
  • Clifford Thies

Abstract

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

Suggested Citation

  • Christopher Baum & Clifford Thies, 1998. "Reexamining the term structure of interest rates and the interwar demand for money," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 22(2), pages 5-12, June.
    • Handle: RePEc:spr:jecfin:v:22:y:1998:i:2:p:5-12
    DOI: 10.1007/BF02771472
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/BF02771472
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/BF02771472?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Robert J. Gordon, 1986. "The American Business Cycle: Continuity and Change," NBER Books, National Bureau of Economic Research, Inc, number gord86-1, March.
    2. Nathan Balke & Robert J. Gordon, 1986. "Appendix B: Historical Data," NBER Chapters, in: The American Business Cycle: Continuity and Change, pages 781-850, National Bureau of Economic Research, Inc.
    3. McCulloch, J Huston, 1971. "Measuring the Term Structure of Interest Rates," The Journal of Business, University of Chicago Press, vol. 44(1), pages 19-31, January.
    4. Cecchetti, Stephen G, 1988. "The Case of the Negative Nominal Interest Rates: New Estimates of the Term Structure of Interest Rates during the Great Depression," Journal of Political Economy, University of Chicago Press, vol. 96(6), pages 1111-1141, December.
    5. 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, March.
    6. Bernanke, Ben S, 1983. "Nonmonetary Effects of the Financial Crisis in Propagation of the Great Depression," American Economic Review, American Economic Association, vol. 73(3), pages 257-276, June.
    7. Milton Friedman & Anna J. Schwartz, 1982. "Money and Interest Rates," NBER Chapters, in: Monetary Trends in the United States and United Kingdom: Their Relation to Income, Prices, and Interest Rates, 1867–1975, pages 477-587, National Bureau of Economic Research, Inc.
    8. Clifford F. Thies, 1985. "New Estimates Of The Term Structure Of Interest Rates: 1920–1939," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 8(4), pages 297-306, December.
    9. Friedman, Milton & Schwartz, Anna J, 1982. "The Effect of the Term Structure of Interest Rates on the Demand for Money in the United States," Journal of Political Economy, University of Chicago Press, vol. 90(1), pages 201-212, February.
    10. W. Braddock Hickman, 1960. "Statistical Measures of Corporate Bond Financing since 1900," NBER Books, National Bureau of Economic Research, Inc, number hick60-1, March.
    11. Christopher F. Baum & Clifford F. Thies, 1988. "The Term Structure of Interest Rates and the Demand for Money During the Great Depression," Boston College Working Papers in Economics 177, Boston College Department of Economics.
    12. Hafer, R. W., 1985. "The stability of the short-run money demand function, 1920-1939," Explorations in Economic History, Elsevier, vol. 22(3), pages 271-295, July.
    13. Friedman, Milton, 1977. " Time Perspective in Demand for Money," Scandinavian Journal of Economics, Wiley Blackwell, vol. 79(4), pages 397-416.
    14. 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.
    15. 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)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. C. P. Barros & João Ricardo Faria & Luis A. Gil-Alana, 2017. "The demand for money in Angola," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 41(2), pages 408-420, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Nelson, Edward, 2013. "Friedman's monetary economics in practice," Journal of International Money and Finance, Elsevier, vol. 38(C), pages 59-83.
    2. Michael D. Bordo & Joseph G. Haubrich, 2017. "Deep Recessions, Fast Recoveries, And Financial Crises: Evidence From The American Record," Economic Inquiry, Western Economic Association International, vol. 55(1), pages 527-541, January.
    3. Harold L. Cole & Lee E. Ohanian, 2001. "Re-Examining the Contributions of Money and Banking Shocks to the US Great Depression," NBER Chapters, in: NBER Macroeconomics Annual 2000, Volume 15, pages 183-260, National Bureau of Economic Research, Inc.
    4. Stephen D. Williamson, 1989. "Restrictions on Financial Intermediaries and Implications for Aggregate Fluctuations: Canada and the United States 1870–1913," NBER Chapters, in: NBER Macroeconomics Annual 1989, Volume 4, pages 303-350, National Bureau of Economic Research, Inc.
    5. Michael Bordo & Arunima Sinha, 2016. "A Lesson from the Great Depression that the Fed Might have Learned: A Comparison of the 1932 Open Market Purchases with Quantitative Easing," NBER Working Papers 22581, National Bureau of Economic Research, Inc.
    6. Cooper, Russell & Ejarque, Joao, 1995. "Financial intermediation and the Great Depression: a multiple equilibrium interpretation," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 43(1), pages 285-323, December.
    7. J. Peter Ferderer, 1999. "Credibility of the Interwar Gold Standard, Uncertainty, and the Great Depression," Macroeconomics 9907002, University Library of Munich, Germany.
    8. Benmelech, Efraim & Frydman, Carola & Papanikolaou, Dimitris, 2019. "Financial frictions and employment during the Great Depression," Journal of Financial Economics, Elsevier, vol. 133(3), pages 541-563.
    9. Lawrence J. Christiano & Roberto Motto & Massimo Rostagno, 2003. "The Great Depression and the Friedman-Schwartz hypothesis," Proceedings, Federal Reserve Bank of Cleveland, pages 1119-1215.
    10. Margaret M. Jacobson & Eric M. Leeper & Bruce Preston, 2019. "Recovery of 1933," NBER Working Papers 25629, National Bureau of Economic Research, Inc.
    11. J. Peter Ferderer, 1994. "Credibility of the Interwar Gold Standard, Uncertainty, and the Great Depression," Economics Working Paper Archive wp_102, Levy Economics Institute.
    12. Charles W. Calomiris, 1993. "Financial Factors in the Great Depression," Journal of Economic Perspectives, American Economic Association, vol. 7(2), pages 61-85, Spring.
    13. Harrison, Sharon G. & Weder, Mark, 2006. "Did sunspot forces cause the Great Depression?," Journal of Monetary Economics, Elsevier, vol. 53(7), pages 1327-1339, October.
    14. Koenig, Evan F., 1996. "Long-term interest rates and the recent weakness in M2," Journal of Economics and Business, Elsevier, vol. 48(2), pages 81-101, May.
    15. Candelon, Bertrand & Metiu, Norbert & Straetmans, Stefan, 2013. "Disentangling economic recessions and depressions," Discussion Papers 43/2013, Deutsche Bundesbank.
    16. Frederic S. Mishkin & Eugene N. White, 2002. "U.S. Stock Market Crashes and Their Aftermath: Implications for Monetary Policy," NBER Working Papers 8992, National Bureau of Economic Research, Inc.
    17. James C. MacGee & Pedro S. Amaral, 2010. "A Multi-sectoral Approach to the U.S. Great Depression," 2010 Meeting Papers 1242, Society for Economic Dynamics.
    18. Luca Benati, 2008. "Investigating Inflation Persistence Across Monetary Regimes," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 123(3), pages 1005-1060.
    19. Christopher J. Erceg & Michael D. Bordo & Charles L. Evans, 2000. "Money, Sticky Wages, and the Great Depression," American Economic Review, American Economic Association, vol. 90(5), pages 1447-1463, December.
    20. Albrecht Ritschl & Ulrich Woitek, "undated". "Did Monetary Forces Cause the Great Depression? A Bayesian VAR Analysis for the U.S. Economy," IEW - Working Papers 050, Institute for Empirical Research in Economics - University of Zurich.

    More about this item

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:jecfin:v:22:y:1998:i:2:p:5-12. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.