THE THEORY OF INTEREST

On Chart 49 are plotted the curves showing the quar-terly price indexes and the P' and P' derived from them,with the interest rates for the entire period 1890-1927.P' is shown for 120 quarters or 30 years.

Lag In Tears of Interest Rates in Respeet tb Prioo Changes

CHART 50

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Correlation Coefficients Between P' and i: for Various Lags, QuarterlyData, United States , 1890-1927.

These curves of quarterly data tell much the samestory as is told by the curves representing yearly data,shown in Chart 48, for Great Britain. P' obviously cor-responds much more closely to i than does P'.

Chart 50 shows the rather erratic variation of the r’scomputed from i and P' directly without distributing theeffects of price changes.

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