Money Still Matters – The Implications of M4X for Quantitative Easing

7 Pages Posted: 8 Jun 2010


It has been argued that quantitative easing (QE) is designed to prevent a collapse of broad money. However, the official M4 broad-money measure was growing rapidly when QE was introduced. This figure was, though, exaggerated by artificial transactions within banking groups and some have suggested that broad money supply measures should exclude these transactions (M4X). This article tests whether the authorities are right to focus on M4X. It is concluded that M4X is more closely related to the wider economy than M4 but that the official M4X statistics need substantial improvement. The conclusions regarding QE generally are more nuanced and it is noted that the UK's fiscal profligacy is exacerbating the downturn in the private sector, despite politicians' claims to the contrary.

Suggested Citation

Smith, David B., Money Still Matters – The Implications of M4X for Quantitative Easing. Economic Affairs, Vol. 30, Issue 2, pp. 61-67, June 2010, Available at SSRN: or

David B. Smith (Contact Author)

University of Derby ( email )

Kedleston Road
Derby, Derbyshire DE22 1GB
United Kingdom

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