NEW ESTIMATES OF THE TERM STRUCTURE OF INTEREST RATES: 1920 - 1939

New estimates of the term structures of interest rates of the inter-war period, 1920 - 1939, are constructed from micro data sets of the publicly traded bonds of the period using a generalized bond pricing formula.; These term structure estimates are compared to the received term structure estimates of the period, Durand's "basic yields." The "basic yields" are found to be poor approximations, being over-smoothed, wiping out humps in several term structures, and emasculating liquidity premiums. Thus, the findings of the many other researchers who have used the "basic yields" are called into question. Specifically, Meiselman's "error-learning" model is tested using the new term structures, and his finding of no liquidity premium is shown to be a statistical artifact depending on the use of the "basic yields."; Incorporated into this study's bond pricing formula are risk spreads and feature valuations that allow analyses of other issues with the inter-war data. The estimated risk spreads appear to support the "crisis-at-maturity" hypothesis. The estimated values of the "exchange privilege" on Treasury securities appears sufficient to explain the anomalous negative yields observed on short-term Treasury securities during the 1930s. The call feature values become significant during the 1930s when bond yields fell to historical lows and the prices of outstanding bonds rose to new highs.; The impression obtained is that the bond markets of the inter-war period were rational pricing mechanisms--in the sense that bonds appear to have been priced by a formula incorporating reasonable term structures, risk spreads and feature valuations. However, the standard Keynesian view of the role of the liquidity trap during the Great Depression receives some support insofar as "instantaneous interest rates" on risk-free securities appear to be zero during 1933 to 1936.