dow & saville - a critique of monetary policy; theory and british experience (2001)

[...]... course of output and prices, and the latter as determined entirely by non -monetary factors This general approach appears similar to that of Kaldor (1980) We have also had to be concerned with interest rates For the authorities have tried to control monetary growth largely by changes in what used to be called Bank rate and which we call central-bank rate Most theoretical discussion of interest rates has... that decade We have to thank Michael Artis, John Fleming, Andrew Britton, and an anonymous critic who read and commented on the whole of the draft, and Brian Henry, Bryan Hopkin, and Christopher Allsopp who read parts I have also to thank my son James for help with two passages A book such as this, dealing with a broad theme and touching on many fields where a vast amount has been written, inevitably... general discussion of the determinants of floating exchange rates • Chapter 6 considers the impact of public-sector financial operations, and in particular of public-sector borrowing from the banks We are then in a position to examine in Part II the impact of policy • Chapters 7-1 0 analyse the impact of the various methods of monetary control that have been attempted since 1971 or, in the case of monetary. .. operation of monetary policy looks to those working in a central bank, and is an attempt to make sense of that experience The central bank is only one operator among many in financial markets, and those responsible for conducting monetary policy are invariably fully aware of the strength of market forces and their limited power to influence the outcome The actual financial operations conducted by a central... collapse One way to advance would indeed be, as he says, to interrogate the facts again But empirical proof on questions like this is hard to get; and what would also be helpful would be a clearer account of the short-term micro-foundations of the 'monetarist premise' Laidler hails what we say of 'buffer stock' money as 'a new element in British Keynesian thought' and as a bridge between that view and. .. (1978); and for later years for instance in Artis and Lewis (1981), in Gowland (1982), in the collection of material from the Bank of England Quarterly Bulletin (in 8 Introduction Bank of England 1984), and (though this is part only of their aim) in Goodhart (1984) and Spencer (1986) A particular reason for not attempting a fuller historical account here is that it is in fact difficult to write of what... the monetary base, which is what we were at pains to deny; and Cobham's criticism would, again, seem to reflect his not being aware how radical our argument is 3 In our discussion of overfunding we should, he says, have referred to a paper by Andrew Bain prepared for the Bank of England's Panel of Academic Consultants in 1982 It was not referred to, not because I was unaware of it, but because I happen... Output and real exchange rate, 197 0-8 6 11.8 Inflation rate and bank base rates, 197 0-8 5 11.9 Selected real asset prices, 197 0-8 5 11.10 (a) Inflation and commercial companies' sources of funds, 196 8-8 5 11.10(b) Industrial and commercial companies' uses of funds, 196 8-8 5 4 57 58 89 101 126 156 175 176 177 178 179 180 181 182 183 184 185 1 Introduction This book is an essay in theory, and a study of monetary. .. prices and quantities Various forms of uncertainty have an important place at most stages of our account Not only is money held as a hedge against uncertainty; its creation, via the granting of new loans, depends on the attitudes of banks towards the credit worthiness of borrowers, which is impossible to assess objectively Because of uncertainty, both capital markets and exchange Introduction 1 markets are,... imperfections, not of market perfections, and as arising not from malfunctioning of the labour market but from the inability of interest rates to equilibrate saving and investment at full employment Our analysis is in this spirit and as Laidler says has 'a strong claim to be regarded as reflecting an authentic development of the central ideas of the General Theory' But unlike Keynes, and unlike most Keynesians15—indeed, . clear and unmistakable description. 1 David Laidler (1989), &apos ;Dow and Saville& apos;s Critique of Monetary Policy: A Review Essay', Journal of Economic Literature, Sept.; and. he says, have made 'more explicit reference' to 'the debate arising out of Sargent and Wallace's work on the monetary- fiscal policy link and the debt/income ratio'. . premise'. Laidler hails what we say of 'buffer stock' money as &apos ;a new element in British Keynesian thought' and as a bridge between that view and recent monetarist