Explain why the bank of England adopted a policy of 'overfunding' in the early 1980s and why it was eventually abandoned.

... Thomas Wickes A027931 Explain why the bank of England adopted a policy of 'overfunding' in the early 1980s and why it was eventually abandoned. The policy of overfunding corresponded with the view of pragmatic monetarism of the early eighties. However its utilisation was a direct result of what went before it. The corset and credit controls were the main tools that the authorities used to control the money supply in the years preceding overfunding. Therefore it is useful to consider these policies as a precursor to examining overfunding. The corset was different from previous schemes of monetary control in that it didn't differentiate between bank lending to the public or private sector. In this way the government felt that it would be able to 'permit competition between banks and avoid freezing the distribution of deposits between them' (Dow and Saville, 1988,pp154). The corset was designed to work hand in hand with

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