The Endogenous Money Stock: Empirical Observations from the United Kingdom

Abstract

The purpose of this paper is twofold. First, we update in the second section the credit segment of a Post Keynesian macro model, the detailed features of which will already be familiar to the readers of this journal (Arestis, 1987-88). What the updating is especially anxious to capture is the sharp increase in the share of U.K. bank debt held by the personal sector since we should expect the personal sector's demand for bank lending to be more interest-sensitive than the demand for bank lending from finns.' Figure 1 demonstrates the essential fact for this study: after 1983 consumer borrowing became a vital component in bank loan portfolios, while at the same time a decline in the share of bank advances going to corporations or industrial and commercial companies (ICCs) was observed. Figure 1 clearly shows that consumer and ICC shares of bank lending combined accounted for over 86 percent of the total in 1979(3). After the crossover during 1983, their combined shares held briefly at 85 percent but by 1988(3) they accounted for only 78 percent of total bank debt. Over the same period, (nonbank) financial institutions increased their share of total bank debt from 0.14 in 1979(3) to 0.15 in 1983(3) and then to 0.22 by 1988(3). Since 1988(3), the shares have

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