Rangarajan & Bhanumurthy: Can price levels rise without growth in money supply?

“For its successful application, therefore, the theory underlying the discount-rate policy required, firstly, that the discount rate of the central bank should have a prompt and decisive influence on money rates and credit conditions within its area of operation, particularly when it was desired to raise money rates and contract credit, and secondly, that there should be a substantial measure of elasticity in the economic structure in order that prices, wages, rents, production and trade might respond to changes in money rates and credit conditions.” (M.H. de Kock, Central Banking, Page 179)