Spectral analysis of the structure of interest rates in the Netherlands

Spectral methods are used to examine the relationships among the rates of return on financial assets observed in the Netherlands during the period 1962–1970. It is found that both the rates on short-term loans and bonds display seasonal movements, which are related to the periodic contractions of the money supply. Furthermore, there is evidence of a four-year cycle which presumably must be attributed to the cyclical tightness of monetary conditions in the Netherlands. It is concluded that the customary distinction between the money market and the capital market, and the subdivision of the latter into a market for bonds and a stock market, is empirically meaningful.