Abstract
One important strand of the new theory of monetary control (sometimes called the doctrine) is the argument that the effectiveness of monetary policy does not depend solely on changes in interest rates and the impact of rate changes on the demand for loanable funds. Changes in the availability of credit, it is alleged, can reinforce the effects of changes in the rate of interest. This theory has been criticized on the grounds that changes in availability, if they occur, are bound to be temporary and are therefore of no great consequence in stemming (or stimulating) the demand for loanable funds. A further possibility-one curiously neglected by the critics of the availability doctrine, although it appears to have been much in the minds of earlier writers on credit rationing-is that changes in credit availability might be in a direction to offset rather than to reinforce the effects of changes in interest rates.
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