. Cycles of prosperity and depression in the United States, Great Britain and Germany; a study of monthly data 1902-1908 . To thisgroup belong the reserves of the banks, bank deposits, bankloans and discounts, call loan rates and commercial paperrates. The index numbers for these series are found inTable C. For our period direct correlation is found to exist betweenthe first three series named. When bank reserves are largeit is found that bank loans and deposit liabilities are diminished reserves it is found that loans are contracted 32 UNIVERSITY OF WISCONSIN STUDIES and with t
. Cycles of prosperity and depression in the United States, Great Britain and Germany; a study of monthly data 1902-1908 . To thisgroup belong the reserves of the banks, bank deposits, bankloans and discounts, call loan rates and commercial paperrates. The index numbers for these series are found inTable C. For our period direct correlation is found to exist betweenthe first three series named. When bank reserves are largeit is found that bank loans and deposit liabilities are diminished reserves it is found that loans are contracted 32 UNIVERSITY OF WISCONSIN STUDIES and with that goes a diminution of bank deposits. The re-maining two series in the group correlate in inverse ratio withthe rest of the group. Money rates are high when bank re-serves are depleted, and low when there is a plethora of reserves, deposits and loans drop during the period ofprosperity and find their lowest level at the crisis period, whilethey rise during the period of depression. Money rates onthe other hand rise during the period of prosperity and fallafter the crisis and during depression. CHART. 3. 00-S 1904 1905 1902 1903 i9v* *»vv 1906 iLgo? 1903Reserves were selected as the best single representative ofthe group. Coefficients of correlation were worked out be-tween it and the other series testing various lags as results are given in Table VI. HANSEN—CYCLES OF PROSPERITY AND DEPRESSION 33 + J2 + fa p ofao o M < 1 O i—(H< fal-a« fa O Ph pa 34 UNIVERSITY OF WISCONSIN STUDIES From this table it is clear that reserves, deposits, loans, andcall loan rates have synchronous cyclical fluctuations. Thecommercial paper rates series lags three months behind. A Banking Composite was next constructed. For this com-posite I selected the three closely related series—cash reserves, , CHABT 4
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