This paper examines inflationary expectations in order to investigate whether the deflation of 1930-1932 could have been anticipated. The major conclusion is that beginning in late 1930, and possibly as early as late 1929, deflation could have been anticipated at horizons of 3-6 months. This implies, in turn, that short-run ex ante real interest rates were very high during the initial phases of the Great Depression. These results provide further support for the proposition that monetary contraction was the driving force behind the economic decline.

Throughout the 1930s and early 1940s, U.S. Treasury bonds and notes appeared to have negative nominal yields as they approached maturity. But negative nominal interest rates are impossible in a world in which one can always hold cash. The resolution to this puzzle is that Treasury securities, in addition to making coupon payments, gave the owner the right to buy a new security on a future date. This paper describes the institutional environment that led to the apparent negative nominal interest rates; develops a method for valuing the "exchange privilege"; and computes accurate measures of the yield to the coupon-bearing component of these composite bond/options. Copyright 1988 by University of Chicago Press.

Throughout the 1930s and early 1940s, U.S. Treasury bonds and notes appeared to have negative nominal yields as they approached maturity. But negative nominal interest rates are impossible in a world in which one can always hold cash. The resolution to this puzzle is that Treasury securities, in addition to making coupon payments, gave the owner the right to buy a new security on a future date. This paper describes the institutional environment that led to the apparent negative nominal interest rates, develops a method for valuing the "exchange privilege," and computes accurate measures of the yield to the coupon-bearing component of these composite bond/options. These corrected bond and not yields are then used to calculate new estimates of the term structure of interest rates from 1929 to 1949.

Many Keynesian macroeconomic models are based on the assumption that firms change prices at different times. This paper presents an explanation for this "staggered" price setting. We develop a model in which firms have imperfect knowledge of the current state of the economy and gain information by observing the prices set by others. This gives each firm an incentive to set its price shortly after other firms set theirs. Staggering can be the equilibrium outcome. In addition, the information gains can make staggering socially optimal even though it increases aggregate fluctuations.

This paper reconsiders the empirical evidence connecting inflation to its higher-order moments. In particular, we examine the statistical properties of the observed positive correlation between the sample mean and the sample cross-sectional skewness of price changes. This correlation has attracted substantial attention over the years and has recently been the focal point of a debate among macroeconomists. We show that the sample mean-skewness correlation suffers from a small-sample bias that accounts for the entirety of the observed correlation. In other words, we establish that one of the stylized facts in the literature on aggregate price behavior need not be a fact at all.

May 01 1999 Rejoinder Michael F. Bryan, Michael F. Bryan Search for other works by this author on: This Site Google Scholar Stephen G. Cecchetti Stephen G. Cecchetti Search for other works by this author on: This Site Google Scholar Author and Article Information Michael F. Bryan Stephen G. Cecchetti Received: December 16 1998 Accepted: December 18 1998 Online ISSN: 1530-9142 Print ISSN: 0034-6535 © 1999 President and Fellows of Harvard College and the Massachusetts Institute of Technology1999 The Review of Economics and Statistics (1999) 81 (2): 203–204. https://doi.org/10.1162/003465399558175 Article history Received: December 16 1998 Accepted: December 18 1998 Cite Icon Cite Permissions Share Icon Share Facebook Twitter LinkedIn Email Views Icon Views Article contents Figures & tables Video Audio Supplementary Data Peer Review Search Site Citation Michael F. Bryan, Stephen G. Cecchetti; Rejoinder. The Review of Economics and Statistics 1999; 81 (2): 203–204. doi: https://doi.org/10.1162/003465399558175 Download citation file: Ris (Zotero) Reference Manager EasyBib Bookends Mendeley Papers EndNote RefWorks BibTex toolbar search Search Dropdown Menu toolbar search search input Search input auto suggest filter your search All ContentAll JournalsThe Review of Economics and Statistics Search Advanced Search This content is only available as a PDF. © 1999 President and Fellows of Harvard College and the Massachusetts Institute of Technology1999 Article PDF first page preview Close Modal You do not currently have access to this content.