Abstract

An Analysis of the German Bundesbank’s Conception of Monetary and Credit Policy for the Period from 1958 to about 1970

The discussion of the structural features of the German Bundesbank’s conception of monetary and creditpolicy, which is presented here, brings some serious defects to light. They are primarily attributable to the circumstance that analytical interest centres exclusively around a specific causal connection (the fundamental relationship presented in equation (8) between availability of free liquidity reserves and the conditions on the money and credit markets) and that it is not appreciated that the chosen indicator is an endogenous variable, the value of which derives from the interplay of political and autonomous forces. Only a coherent hypothesis which makes adequate allowance for the interdependencies can cast light on the properties of certain variables and on their suitability as indicators. Only after carrying out such analytical preliminary work is there any point in making empirical tests of the suitability of various variables as indicators, if one wishes to avoid lapsing into naive empiricism divorced from theory.