RELATION TO MONEY AND PRICES

Chart 51, on the contrary, shows, in sharp contrast,the steady increase in r computed from i and pricechanges with influence distributed over periods from 20to 120 quarters. This chart shows that, in the period1915-1927, r reaches its maximum (+ 0.738) only when

1890-1914

1916-1927

1-20 1-30 1-40 1-50 1-60 1-70 1-80 1-901-1001-1101-120

Av=6.7 10 13.3 16.7 20 23.3 26.7 30 33.3 36.7 40 43.3Distributed Lag, by Quarters, of i in respect to P

CHART 51

Correlation Coefficients Between P' and i for Various Distributions ofLags. P' is the Combined Effect at Any Point of Time of the In-fluence of Preceding P" ’s with Lags Distributed. Quarterly Data,United States , 1890-1927.

a total of 120 quarters, or 30 years, is included in theperiod subject to the influence of price changes upon i.

The studies of both the long term and short termmovements of prices and interest rates give very similarresults. In both studies the r’s are insignificant whenP' and i are correlated directly, either with or withoutlagging, so long as we ignore the fact that the effects

[ 427 ]