§ Mr. David Priceasked the Chancellor of the Exchequer, in pursuing the Government's economic policy, what statistical relation he is assuming between the level of interest rates and the volume of private sector borrowing.
§ Mr. Lawson[pursuant to his reply, 17 January 1930]: Different types of borrowing respond by different amounts and over different time periods to changes in interest rates. The response also depends on conditions ruling in particular credit markets at the time of the change. Furthermore, a distinction has to be drawn between the direct effects of interest rate changes which occur as a result of the change in the price of credit and indirect effects which occur as a result of induced changes in other determinants of credit demand such as the level of prices and economic activity. Econometric evidence suggests that the full impact of interest rate changes on borrowing comes through only after a considerable period. Some recent Treasury research into bank lending is described in part one of A Financial Sector for the Treasury Model (Government economic service working paper No. 17), and some more up-to-date estimates are included in Her Majesty's Treasury Macroeconomic Model Technical Manual 1979: both publications are in the House of Commons Library.