By Stephen Burgess and Norbert Janssen of the Bank's Monetary and Financial Statistics Division.
The concept of money traditionally relates to goods or assets that are generally accepted as media of exchange. In practice, there is considerable disagreement about how money should be measured. To ensure its measure of broad money remains relevant, the Bank regularly reviews the theoretical and practical basis of its definition of M4, as part of its long-term research programme. This article explains the Bank's analysis undertaken over the past year, in which a key issue has been to question whether the present boundary between the money-creating and the money-holding sectors is still appropriate. The Bank proposes to move that boundary in a few places, to address some changes that have taken place in the global financial system in recent years. In most other respects, the Bank's measure of broad money will be unaffected, as there are no compelling reasons for further modifications. The Bank welcomes readers' views on the proposals discussed in this article, by the end of December.