Financial Credit Multipliers and the Availability of Funds

In an almost dialectical fashion monetary economics has been merged with its antithesis-the Keynesian model of income-generation -to form a new synthesis: a synthesis in which money, the change in the stock of money, or, more adventurously, the stock of credit, or the change in the stock of credit outstanding, are regarded as important variables on which consumers' and investors' ex-ante demands for goods and services depend.2 Certainly the new synthesis has not been widely accepted, but more modest variants of its general approach are well represented in the literature. Warburton and Friedman, for instance, have produced evidence showing that the change in money stock acts as a leading indicator as to future changes in money income; while Duesenberry, a member of the availability school, states that there are grounds to suppose that it is the availability of finance rather than the explicit costs of funds which determines the volume of business investment.3 Outside of the academic realm, governments too have shown a revived interest in the operation of their countries' financial systems. In 1958 the Radcliffe Committee in the United Kingdom, and in 1960 the Commission for Money and Credit in the United States, published their reports which, when considered along with the subsequent publication of the evidence on which they were based, indicate an official interest in the financial mechanism which has certainly not been exceeded since the early 1930s. The introduction of the flow-of-funds schedule in the Federal Reserve Bulletin and the U.K. Central Statistical Office's publication of the new periodical Financial Statistics show that this revealed interest has not abated. Quite naturally, as the variants of the above hypothesis have been developed, fresh attention has been paid to the process by which money and credit are created. Initially, the relatively simple bank-deposit multiplier of Phillips and Keynes was re-examined.4 A. Gambino, for

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