Getting the Measure of Money: A Critical Assessment of UK Monetary Indicators

by Anthony Evans

Overview

How much money is circulating in the United Kingdom? The question sounds simple. In fact, it is notoriously difficult to answer, because what counts as money is not a straightforward matter. A variety of measures have been advanced, and they tell different stories about the changing supply of money in an economy. These differences are of more than merely academic interest, because measures of the money supply are inputs to the decisions of central banks. Wrong answers can lead to wrong actions, with potentially devastating economic effects.



This book examines the measure of money and, in that light, the actions of the Bank of England in the lead up to the 2008 financial crisis and its aftermath. It is essential reading for anyone interested in money, measures of its quantity, and the relationship between the money supply and the economic cycle.

Product Details

ISBN-13:	9780255367677
Publisher:	London Publishing Partnership
Publication date:	02/15/2019
Pages:	206
Product dimensions:	5.11(w) x 7.83(h) x 0.64(d)

About the Author

Anthony J. Evans is Professor of Economics at ESCP Europe Business School. He has published in a range of academic and trade journals and is the author of Markets for Managers (Wiley, 2014). His work has been covered by most broadsheet newspapers, and he has appeared on Newsnight and the BBC World Service. He is part of the MOC Affiliate Faculty for the Institute for Strategy and Competitiveness at Harvard Business School, and is a member of the Institute of Economic Affairs’ Shadow Monetary Policy Committee. He is a UEFA qualified soccer coach and lives in Hertfordshire with his wife and two children.

Table of Contents

The author vii

Preface viii

Acknowledgements xi

Summary xii

Tables and figures xiv

1 Introduction 1

2 M: The importance of alternative monetary aggregates 8

Summary of key points 8

Introduction 9

Can money be measured? 13

Austrian definitions of the money supply 18

The Goldilocks measure 29

Divisia money 36

Conclusion 42

3 V: Velocity shacks, regime uncertainty and the central bank 46

Summary of key points 46

Introduction 47

The demand for money 49

Supplier-induced demand and central banks 62

Regime uncertainty and big players 67

Conclusion 79

4 P: The hidden inflation of the Great Moderation 80

Summary of key points 80

Introduction 81

Inflation vs price-level targets 84

Fan charts 89

Price indices 94

Productivity norm 103

Conclusion 115

5 Y: GDP, GO and the structure of production 119

Summary of key points 119

Introduction 119

National income accounting 123

Beyond GDP 130

Gross production and capital consumption 135

Evidence for the UK economy 148

Conclusion 155

6 Conclusion 157

The dynamic process of economic crises 158

Policy conclusions 162

References 167

About the IEA 186