NEW EVIDENCE ON THE TERM STRUCTURE OF INTEREST RATES: 1884-1900.

Three fundamental observations have been made with respect to the historic behavior of the term structure of interest rates in the United States. (1) In general, yield curves ascend in periods when the level of long-term and short-term interest rates is low and descend in periods when the level of rates for both maturities is high. Yield curves which are invariant with term are more typical of periods when the level of rates is near the mid-point of the normal range. (2) Short- and long-term interest rates tend to move together cyclically, with the more volatile short-rates rising relative to long-rates during periods of economic expansion and falling relative to long-rates during periods of contraction. (3) The year 1930 is considered a benchmark in the long history of interest rates since the Civil War in that short-rates are thought to have been generally higher than long-rates prior to that date and were consistently below them for approximately thirty years thereafter. The purpose of this paper is to ascertain whether investors' responses to maturity-related interest-rate differentials in the late nineteenth century were, in fact, essentially different from those of later decades. To do so requires the generation of yield curve estimates for the period 1884-1900. [ABSTRACT FROM AUTHOR]