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| With reference to the ] ], the '''M4''' is a definition of the money supply denoting ''Broad Money'', a wide definition of the volume of sterling in the economy, encompassing notes and coin as well as money held in bank accounts. The measure is equivalent to the US ''M3'' (see ] for US definitions). | With reference to the ] ], the '''M4''' is a definition of the money supply denoting ''Broad Money'', a wide definition of the volume of sterling in the economy, encompassing notes and coin as well as money held in bank accounts. The measure is equivalent to the US ''M3'' (see ] for US definitions). | ||
| <blockquote> | |||
| M4 = M0 + UK residents' bank deposits + deposits made by the private sector | |||
| </blockquote> | |||
| Where M0 (''Narrow Money'') denotes the total of notes and coin in circulation in the economy plus commercial banks' deposits with the ]. | Where M0 (''Narrow Money'') denotes the total of notes and coin in circulation in the economy plus commercial banks' deposits with the ]. | ||
Revision as of 10:14, 25 November 2006
With reference to the UK economy, the M4 is a definition of the money supply denoting Broad Money, a wide definition of the volume of sterling in the economy, encompassing notes and coin as well as money held in bank accounts. The measure is equivalent to the US M3 (see Money supply for US definitions).
M4 = M0 + UK residents' bank deposits + deposits made by the private sector
Where M0 (Narrow Money) denotes the total of notes and coin in circulation in the economy plus commercial banks' deposits with the Bank of England.
There are several different definitions of money supply to reflect the differing stores of money. Due to the nature of bank deposits, especially time-restricted savings account deposits, the M4 represents the most illiquid measure of money. The M0, by contrast, is the most liquid measure of the money supply.