M
M0 (E4)
The narrowest definition of the money supply consisting only of notes and coin in circulation plus bankers’ deposits with the Banking Department of the BANK OF ENG LAND. This measure was introduced into the UK in October 1983 and given increasing prominence in Treasury statements from October 1985. So many payments are made by the transfer of bank deposits that M0 is only a partial picture of economic activity in a modern economy. Also changes in the method of wage payment from cash to cheque change the extent to which M0 is representative. However, it has recently been regarded as a useful guide to the size of the BLACK ECONOMY that is dominated by cash transactions. Changes in M0 can lead or lag NOMINAL GROSS DOMESTIC PRODUCT.
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