Monetary base control

Quarterly Bulletin 1979 Q2
Published on 01 June 1979

This article has been prepared mainly by M. D. K. W. Foot, C.A.E. Goodhart and A.C. Hotson of the Bank's Economic Intelligence Department.

This article considers whether monetary base control should be the means by which the authorities control the monetary aggregates. We have approached this subject as economists rather than as representatives of the Bank of England, and we seek to contribute to what has hitherto in the United Kingdom been only a limited discussion. Many of the subjects raised in the discussion are candidates for detailed consideration on both a theoretical and a practical level. Moreover, the various proponents of monetary base control often have widely differing proposals in mind, a fact which significantly increases the scope of the analysis required. What follows in this article, therefore, is not in tended to be an exhaustive treatment of the subject. In particular, it concentrates on the more theoretical, economic issues and only raises in passing some of the implications of the various proposals for the structure of existing financial markets and for the authorities' present methods of operation.

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