The Mechanism of Monetary Control

  • G. A. Fletcher


Ever since the London bill dealers were granted discount accounts at the Bank of England, in the aftermath of the crisis of 1825, the discount houses have occupied a peculiar and key position in the mechanism through which the Bank might seek to control the private-sector banking system.1 In the present chapter this role of the discount houses is examined in the context of the controversy, which was ‘important for the development of British monetary economics’2 for a period of a decade and a half from the mid-1950s, over the question of central bank control of the level of bank deposits.3 It has already been shown (see Chapter 7, above) that the reserve ratios originally adopted voluntarily by bankers, as a matter of professional prudence, were later imposed by the monetary authorities as possible means of regulating bankers’ operations in order that they might help to implement, or at least that they might not frustrate, official policy.


Banking System Liquid Asset Treasury Bill Bank Deposit Bank Rate 
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  1. 7.
    J. M. Parkin, ‘The Supply of Money’, Readings in British Monetary Economics ed. H. G. Johnson et al. (Oxford, 1972) p. 204.Google Scholar
  2. 24.
    R. L. Crouch, ‘The Inadequacy of “New Orthodox” Methods of Monetary Control’, Economic Journal (1964) 916–34.Google Scholar
  3. 29.
    B. Griffiths, The Determination of the Treasury Bill Tender Rate’, Economica (1971) 180–91.Google Scholar
  4. 40.
    R. F. G. Alford, ‘Bank Rate, Money Rates and the Treasury-Bill Rate’, Essays in Money and Banking in Honour of R. S. Sayers, ed. C. R. Whittlesey and J. S. G. Wilson (Oxford, 1968) pp. 1–25.Google Scholar

Copyright information

© G. A. Fletcher 1976

Authors and Affiliations

  • G. A. Fletcher
    • 1
  1. 1.University of LiverpoolUK

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