An econometric study of the British monetary system

This article aims to explain the British money stock and to shed general light on the British monetary system. The money stock does not depend strictly on popular preferences outside the banks and the authorities. Regulations do not permit the British banks to take an uncovered position in a foreign currency, and therefore to augment their domestic debt assets by borrowing abroad. As a result, these banks have no immediate control over their total domestic assets. Their basic policy variables are their interest rate on loans to private customers, and the rate of services that they provide on their deposits (...).