Of course, this accelerator effect can also work in reverse: a decrease in house prices tends to reduce household borrowing capacity, and amplify the decline in spending. 2  Research conducted at the Bank of Canada and elsewhere suggests that the financialaccelerator effect is economically significant. 1 This finding is also consistent with reducedform evidence of a correlation between consumer spending and housing wealth.
To meet its obligation of controlling the money supply, the Reserve Bank must ensure that the amount of liquidity available in the banking system and the level of interest rates will be such that there will be no excessive increase in the money supply.