The role of seasonal interest rate fluctuations in a classical model

This paper examines the role of seasonal interest rate changes within a classical model. It shows that the rate of interest is relatively high during seasons in which resources have a relatively high value. Hence seasonal interest rate variations cause economic actors to reallocate resources from seasons during which they have a relatively low value to seasons during which they have a relatively high value. If interest rate smoothing prevents this difference in the value of resources across seasons from being reflected in the rate of interest, then it is reflected in the seasonal variation of other prices.