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Published online by Cambridge University Press: 26 March 2020
The relation between the government's need to borrow and the stock of money in the country is a complex one. It is affected by the nature of the expenditures and revenues which require the borrowing and by the way in which the borrowing is financed. From time to time it has been suggested that nevertheless the two magnitudes have moved together in a stable manner. In this article we demonstrate that no such convenient coincidental movement appears to have been recorded in the UK and hence that it is possible for the government to permit variations in the PSBR to try to offset the recession even while maintaining a medium-term regime of monetary targets.
page 19 note (1) Financial Statement and Budget Report 1980-81, p. 16 et seq.
page 19 note (2) Beenstock, M. and Longbottom, A., Economic Outlook, vol. 4. no. 9, June.
page 20 note (1) We are grateful for the cooperation provided by Michael Beenstock and Andrew Longbottom in the calculation of these results. The conclusions we draw in this article are of course our responsibility and their cooperation does not necessarily imply that they agree with them.
page 20 note (2) Henry, S.G.B., Mayes, D.G. and Savage D., ‘Memorandum on monetary policy’, Treasury and Civil Service Committee, HC 720, HMSO, July 1980, pp. 147-59.
page 20 note (3) Davidson, J. E. H., Hendry, D. F., Srba, F. and Yeo, S., ‘Econometric modelling of the aggregate time-series relation ship between consumers’ expenditure and income in the UK'. Economic Journal, vol. 88, December 1978. It should be emphasised that Davidson et al. is the best known of a rapidly growing body of literature and there are many other references which should be made here. These are set out in the article by Cuthbertson on pp. 62-72 of this Review.
page 21 note (1) Minford, A. P. L. and Brech, M., SSRC University of Liverpool Research Project, Working Paper no. 7901. ‘The Wage Equation and Rational Expectations’.
