ABSTRACT

In the absence of a short-term money market, the central bank in the country concerned is by no means entirely powerless to control the activities of the commercial banks and thereby the supply of money that is made available to the economy. In these circumstances, however, if the central bank is to exert more than a moral authority, it must usually be prepared to intervene directly to control commercial bank liquidity and interest rates. 206 Yet in its formative years, when these conditions are most likely to apply, the central bank will be feeling its way and somewhat loath to adopt measures that smack too obviously of dictation, since in the successful implementation of their policies the authorities must always depend to quite a considerable extent on the co-operation of the rest of the financial community.