... low), interest rates are high, and conversely —reflectingan inverse effect of the growth rate of the money stock on interest rates. On a theoretical level such an explanation seems plausible. On ... attributed it to monetary effects Interest Rates and Bank Reserves233 on interest rates. Although never spelled out, the basic hypothesiswas that a tight reserve position forces banks to restrict ... restrict credit, and aposition of ease allows them to expand. Hence, low reserves in rela-tion to deposits lead to high interest rates, and conversely. How theeffect on rates occurs, however, was...