Date of Award


Degree Type


Degree Name

Doctor of Philosophy


This thesis is a set of essays addressing some issues related to the control of the money supply. Some issues considered are the appropriate instrument for monetary control (monetary base or interest rate), the time horizon over which this control should be effected, and the correct response to deviations of the money stock from its target path.;The first chapter is an introduction. The second chapter reviews the literature on two alternative rationales for money-supply targets which have quite different implications for the seriousness of departures of the money stock from its target.;Chapter Three deals with instrument instability: the argument that lagged interest rates affect the demand for money in such a way that if the money supply were controlled rigidly, interest rates would behave explosively. This argument is evaluated in the light of two alternative explanations of the effects of lagged interest rates on money demand (expectations and costly adjustment).;Chapter Four examines the argument that lagged reserve accounting would give rise to potentially-explosive oscillations in deposits if the monetary base were controlled. This argument is evaluated using a rational-expectations model incorporating optimizing behavior by competitive (deposit-taking) banks.;Chapter Five deals with the argument that, under lagged reserve accounting, the monetary base cannot be controlled because of evidence that the money supply causes the monetary base. In this essay, a simple theoretical counter-example is constructed in which, although the authorities can use the monetary base to control the money supply under lagged reserve accounting, causality tests would indicate that money causes base.



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