Broad money

In economics, broad money is a measure of the money supply that includes more than just physical money such as currency and coins (also known as narrow money). It generally includes demand deposits at commercial banks, and any monies held in easily accessible accounts. Components of broad money are still very liquid, and non-cash components can usually be converted into cash very easily.

One measure of broad money is M3, which includes currency and coins, and deposits in checking accounts, savings accounts and small time deposits, overnight repos at commercial banks, and non-institutional money market accounts. This is the main measure of the money supply, and is the economic indicator usually used to assess the amount of liquidity in the economy, as it is relatively easy to track.

However broad money can have different definitions depending on the situation of usage, usually it is constructed as required to be the most useful indicator in the situation. More generally, broad money is just a term for the least liquid money definition being considered and less a fixed definition across all situations. As such broad money may have different implications in the United States than it does in Australia, and even from academic paper to paper. The term broad money will usually be more exactly defined before a discussion, when it is not sufficient to assume a wider definition of money.

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