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Monetary Control

Volume 990: debated on Thursday 7 August 1980

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asked the Chancellor of the Exchequer whether the strong grounds referred to in paragraph 3 of the introduction to the Green Paper on monetary control are theoretical or empirical; and if he will circulate in the Official Report data showing for the principal countries, including the United Kingdom, the relationship between the supply of money and money national income on the basis of the assumed time lags for the periods 1950 to 1960, 1960 to 1970 and 1970 to date, together with the evidence which he has that the causality flowed from money to prices and not in the reverse direction.

The nature of the long-term relationship between the growth of the money stock and the rate of inflation was discussed in the July issue of Her Majesty's Treasury's Economic Progress Report. Data for the money supply and national income for the principal countries for the periods in question are available from the International Financial Statistics Yearbook for 1979, published by the International Monetary Fund.

asked the Chancellor of the Exchequer what is the period of years which he had in mind in paragraph 3 of the introduction to the Green Paper on monetary control; and if it is his view that in any shorter period the relationship between prices and the money stock can and does diverge significantly.