Abstract
This paper presents the methodology used to construct reliable estimates of the term structure of interest rates for the United States during 1919–1930. These monthly term structures are based on individual corporate bonds' price quotations for the majority of U.S. railroad corporations' issues of that era. McCulloch's cubic spline methodology, coupled with Nelson and Siegel's parsimonious estimator, is used to derive curves for three investment-grade risk classes. These estimates compare favorably with Durand's hand-smoothed estimates as well as earlier annual estimates generated by Thies. They provide a consistent basis for a wide range of monetary and financial research on this period.
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Baum, C.F., Thies, C.F. On the construction of monthly term structures of U.S. interest rates, 1919–1930. Computer Science in Economics and Management 5, 221–246 (1992). https://doi.org/10.1007/BF00426761
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DOI: https://doi.org/10.1007/BF00426761