^{page 46 note 1} For example, in the United States, state non-member banks often are permitted to hold reserves with other commercial banks; clearing is done through clearing houses and correspondents as well as through the facilities of the Federal Reserve System.Google Scholar

^{page 48 note 1} Divrei Haknesset (Parliamentary Record or D.K., henceforth), v. 16, pp. 2050–1.Google Scholar

^{page 48 note 2} Recommendations for a National Bank Law: The Report of the Committee Concerning the Establishment of a National Bank (Jerusalem: Sept. 1952 9 pp., mimeo.). Dr E. Lehmann, who served as secretary of the Committee, was kind enough to provide me with his copy, which is the only complete original I was able to track down.Google Scholar

^{page 49 note 1} Paragraph 10 (author's translation).Google Scholar

^{page 49 note 2} The danger that under this structure the central bank would become little more than the financing arm of the Treasury did concern the Committee. In order to restrain government borrowing, the Report limits central bank loans to the Treasury to no more than 20 % of the government's budget, with the proviso that such loans be repaid at the end of the fiscal year. Yet, the Report is confusing in this area, for the government may sell Treasury bills to the central bank, apparently beyond the 20 % limit.Google Scholar

^{page 50 note 1} Hazaot Hok (5714), no. 207.Google Scholar

^{page 50 note 2} Paragraph 9b.Google Scholar

^{page 50 note 3} Paragraph 10.Google Scholar

^{page 50 note 4} Genachowski, D.K., 16:2052. See also the comments of Zisling (16:2053) and Foerder (16:2063). Dr Lehmann, in correspondence with the author, confirms that political consideration did indeed dictate this decision.Google Scholar

^{page 50 note 5} The Council had two specific duties: to be consulted about the form and content of currency notes and coins (para. 33) and about volume limitations over bank credit and liabilities (para. 55). The latter power is the only substantive one, and according to one authoritative source, was ceded to the Council only to provide it with some semblance of responsibility in the decision-making process.Google Scholar

^{page 51 note 1} Discounting (para. 43); liquidity requirements (para. 51); interest rate maxima (para. 58).Google Scholar

^{page 51 note 2} See Aufricht, Hans, Comparative Survey of Central Bank Law (New York: Frederick A. Praeger, 1965), pp.44 and 48.Google Scholar

^{page 52 note 1} This camp includes M.K.s Genachowski, Ariav, Foerder and Bajarano. See D.K. 16: 2052, 2058, 2062, and 2497 respectively.Google Scholar

^{page 52 note 2} See D.K. 16: 2063 and 2501 for the comments of M.K.s Hazani and Sneh. While Hazani would have Ministers serve on this board, Sneh desired the directors be representive of various groups.Google Scholar

^{page 52 note 3} D.K. 16: 2050 (author's translation).Google Scholar

^{page 52 note 4} D.K. 16: 2498.Google Scholar

^{page 52 note 5} See the cynical comment of Bader, M.K., D.K. 16: 2050, on the motives of the various participants in the debate who advanced the board structure.Google Scholar

^{page 53 note 1} Bank of Israel Bill, paragraphs 15b, 61, 63, 14, and 58b. On bank rates of interest, see the Bank of Israel,Annual Report, pp. 203–4, and Annual Report, 1956, pp. 309–10. (All references to Bank of Israel publications are to the English editions.)Google Scholar

^{page 54 note 1} As shall be noted below, in Bank of Israel—government relations, this statement does not hold true.Google Scholar

^{page 54 note 2} The description that follows holds for the major portion of the Horowitz governorship. The Permanent Committee was established in 1961. Prior to that time, the institution of monetary and banking policy at the Bank was in the hands of the Examiner of Banks.Google Scholar

^{page 54 note 3} One gets the impression that Governor Horowitz surrounded himself with men who interpreted their duty as considering policy and alternative courses of action, as well as pointing out possible consequences. However, they did not feel compelled to resist the final decisions taken by the Governor, whose sole responsibility such decisions were.Google Scholar

^{page 56 note 1} From the point of view of monetary control, the appropriate time span for a policy to come into full effect is more a matter of subjective appraisal than scientific formulation. All that can be said is that the longer it takes for a policy to be implemented fully, the longer will it take for that policy to become fully effective. But this consideration is in general a second-order issue, and in Israel perhaps not even that.Google Scholar

^{page 57 note 1} Note that there was some necessary arbitrariness in the classifications of members by representative groups, since some members were active in a number of roles.Google Scholar

^{page 57 note 2} When Messrs Zeev Sharef and Haim Zadok were appointed to the Cabinet, they resigned from the Advisory Committee. It has been asserted that politics entered in the appointment process, so that the composition of the Advisory Committee broadly reflect the coalition national government. I have not been able to verify this belief.Google Scholar

^{page 58 note 1} This is not to malign the members of the Advisory Committee, who contributed much time and effort, and who by on-the-job training, learned much about economics. But their training and interests differed from those of the professional economist. Con-trast the make-up of the Committee with a perhaps extreme example, that of the Board of Governors of the Federal Reserve System, of whose seven members, four, including the Chairman, are economists.Google Scholar

^{page 58 note 2} It is reported that when Professor Patinkin of the Hebrew University was appointed to the Advisory Council that moribund body took on a new life, and the Governor's reports to it no longer were accepted with equanimity.Google Scholar

^{page 59 note 3} See The Jerusalem Post, 27 January 1965.Google Scholar

^{page 60 note 1} See, for example, Bank of Israel, Annual Report, 1955, p. 204; Dr E. Sheffer, in Israel Management Center, The Interest Rate Law (Hebrew), and Economic Planning Authority, Israel Economic Development (1968), p. 241.Google Scholar

^{page 61 note 1} Bank of Israel, Survey, no. 16 (March, 1962), p. 48.Google Scholar

^{page 62 note 1} In turn, the imposition of a severely restrictive monetary policy, led to widespread and successful avoidance. See my ‘Monetary Controls of the Bank of Israel, 1955–1964’, Quarterly Review of Banking (Hebrew), no. XLII, pp. 27–52.Google Scholar

^{page 63 note 1} The figure for the monetary base is obtained by adjusting the value of the monetary base slightly downward. For the period 1954–1967, the annual rates of growth of both money supply and the monetary base was 15·2 %, and the correlation coefficient between the two series was 0·998.Google Scholar

^{page 65 note 1} The purpose of this paper is not to ask whether this type of policy is desirable. It should be noted, however, that there are limits to the extent of its employment.Google Scholar

^{page 66 note 1} See p. 61 n. 2.Google Scholar

^{page 66 note 2} For an informative article on the relationship between inflation economic growth, see Dorrance, G. S., ‘The Effect of Inflation on Economic Development’, I.M.F. Staff Papers, vol. 10 (03 1963), pp. 1–47.CrossRefGoogle Scholar

^{page 67 note 1} Numerous books on the role of the British Chancellor of the Exchequer, stressing his overriding position in the government, are available. See, for example, Beer, S. H., Treasury Control: The Coordination of Financial and Economic Policy in Britain (Oxford: Clarendon Press, 1957). The model that the British cabinet system provided for Israel need not be emphasized.Google Scholar

^{page 68 note 1} Governor Zanbar has appointed a Managing Director, Dr Eliezer Shefer, former Joint Director of the Bank's Research Department, to serve as his second-in-command.Google Scholar

^{page 69 note 1} See Aufricht, op. cit. pp. 30 and 100–1. Dr Lehmann notes that an earlier draft of the Bank of Israel Bill suggested a Monetary Board, including thereon a member appointed by the Minister of Finance.Google Scholar