Other financial corporations: Cinderella or ugly sister of empirical monetary economics?

Quarterly Bulletin 2002 Q1
Published on 01 March 2002

By K Alec Chrystal and Paul Mizen

UK monetary data are typically analysed at the sectoral level, as it has been found easier to identify stable money demand functions for households and for ‘private non-financial corporations’ (PNFCs) than for the private sector as a whole. This is, at least in part, because the behaviour of ‘other financial corporations’ (OFCs) has been hard to explain and fairly volatile. As a result there are few studies of OFCs, even though they hold a significant component of the broad money stock. There is also a question of relevance for monetary policy makers here. OFCs’ money holdings and borrowing have grown rapidly in recent years and it is important to understand whether this has any consequences for aggregate demand and ultimately for inflation.

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