ABSTRACT

Company bank borrowing is important for both microeconomic and macroeconomic reasons. At the microeconomic level, bank borrowing is a major component of company debt. Therefore, a fully satisfactory explanation of the capital structure of UK companies must include an analysis of their bank borrowing. At the macroeconomic level, it is widely believed that aggregate bank borrowing is a principal driving variable of the broad monetary aggregates, especially sterling M3. On this view, control of bank borrowing in general, or borrowing by companies in particular, is likely to be a prerequisite for control over the broad monetary aggregates.