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.
|Date of creation:||01 Sep 1997|
|Date of revision:|
|Publication status:||published, Journal of Economics and Finance, 1998, 22:2-3, 5-12.|
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