Definitions of Domestic Credit Expansion for the United Kingdom

Several different definitions of Domestic Credit Expansion (DCE) in the UK have been used either for official or for academic purposes, yet apart from an early paper by Art is and Nobay (1969) there has been little serious discussion of the issues involved. This expository note is intended to clarify the differences between the various definitions. Section I uses a table of assets and liabilities by sector to show the relationship between DCE, the change in money supply (ΔM) and the balance of payments/change in foreign reserves (ΔR)for a simple monetary system. Section II uses a more complex table to present three official definitions of DCE for the UK and three definitions that have been used in academic work. Section III considers the choice between the definitions in terms of the purposes for which the concept of DCE might be used. Section IV summarises the main conclusions.