Date of Award
Master of Arts (MA)
Dr. Mark E. Wohar
The founding of the Federal Reserve System in the US in 1914 is viewed as a major structural transformation of the US economy. Scholars consider that the 1914 structural change of the US economy greatly altered the stochastic processes generating short term interest rates. In the US case, most short-term interest rate time series analyses suggest that prior to 1914 short-term interest rate time series were stationary whereas sometime after 1914 they became non-stationary. In addition to this finding, some researchers found that the same phenomenon occurred simultaneously in more European countries. This thesis challenges the theory of simultaneous world-wide occurrence of the altered behavior of short-term interest rates after 1914. It employs 2296 weekly observations of the British 60-day bankers’ drafts’ rate between 1890 and 1933. Using augumented Dickey-Fuller (ADF) regression techniques, the empirical results suggest that the founding of the Fed had no connection with the altered statistical behavior of British short-term interest rates.
Vieru, Catalin, "The altered behavior of interest rates in the UK after the founding of the Fed in the US in 1914" (1996). Student Work. 878.