Page:Indian Journal of Economics Volume 2.djvu/99

 THE RELATION BETWEEN INTEREST AND DISCOUNT D. A. BARKER, Lc.s. In considering the canses which affect the discount it is customary lay undue stress npon the from the scientific point rate of amongst business men to factors of supply, whereas, of view, the factors of demand are of equal if not greater importance. It is, of course, true that imports and exports of gold, preparation for dividend payments, the release of dividends and other similar factors do affect the rate of interest, but to a great extent the movements so cansed are essentially temporary and tbeorecally un- impor. rant. Assuming that exports and imports o! gold in respect o! a particular country are approximately equal over a given period and that banking and business habits in regard to reserves kept and forms o! currency used remain unchanged during that period, tlae supply 2)! money for discounting will remain also practically unchanged. In the absence o! any great alteration in banking practice bankers as a body will Ieep a fairly definite proportion o! cash to current accounts. In the absence o! any marked changes in the supply o! gold, then, the supply of cash, and $herefore o current accounts, will be approximately