76 IMPORTATION OF CAPITAL INTO
borrowing country mainly as commodity imports, we should
expect some correlation to be observable between the ratio of
sxports to imports and the new capital introduced. Unfortunately
 it has not been possible to estimate with sufficient
accuracy the amount of private capital arriving each year;

. PER.
CENT).
E870
ON
IPO;

140

ver

“ndNS
E101

0

100

CENTAGE EXPORTS
70 IMPORTS]

3

ANE
14770
PER
CENT

34

30

"0 RESERVES TO DEPOSITS
pi —— i

Eom
— ao

25

2}

1890
Fie. IV. NEW ZEALAND. BORROWINGS, BALANCE OF
TRADE AND BANK RESERVES, 1872-91
Smoothed 5-year moving-average curves shown heavy

but, accepting the public borrowings alone as an index, the
correlation to be noted between the moving-average curves in
the graph is well-nigh perfect. Interpolating a lag for a year
in the arrival of imports due to loans, the annual plottings move
consistently in opposite directions, i.e. exports increase as new
capital declines, and vice versa. Again, if the capital borrowings
do serve as a basis of credit expansion, the demand for accommodation
 should show itself, if any degree of inflation exists,