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A Note on the Role of Credit in the Determination of Price in the United Kingdom

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  • Harold Black

    (University of Florida)

Abstract

The paper investigates the oral model specified by the British liquidity school, which asserts that there exists a causal and positive relationship between movements in credit (and their controls) and movements in prices. Importantly, the Bank of England has conducted monetary policy consistent with the pronouncements of the liquidity school. Consequently, in order to restrain in rising prices, the Bank of England tightens credit via the use of selective controls on bank lending, calls for special deposits, and hire purchase agreements. When the hypothesis is tested, it is found that credit controls exert little significant effect on prices. The poor performance of the model indicates that the role of credit controls in the determination of retail prices should be deemphasized.

Suggested Citation

  • Harold Black, 1974. "A Note on the Role of Credit in the Determination of Price in the United Kingdom," Public Finance Review, , vol. 2(1), pages 131-136, January.
    • Handle: RePEc:sae:pubfin:v:2:y:1974:i:1:p:131-136
    DOI: 10.1177/109114217400200107
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    References listed on IDEAS

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    1. Hodgman, Donald R, 1971. "British Techniques of Monetary Policy: A Critical Review," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 3(4), pages 760-779, November.
    2. Karl Brunner, 1970. "The “monetarist revolution” in monetary theory," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 105(1), pages 1-30, September.
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