Money is something measurable. The total stock of moneys of various kinds at a particular point of time can be computed. A whole time series of money supply can be constructed. This will show the time behavior of money supply.
We
must note two things about any
measure of money
supply. Firstly, the supply
of money refers to its
stock at any point of time. Money is a stock variable in contrast with a flow variable. It is the change in
the stock of money (say) per year which is
a flow.
Secondly, the stock
of money
always refers to the
stock
of money
held
by the public. This
is
always smaller than the total stock of money in existence. The term public is defined to include all economic
units
(households,
firms and institutions) except the producers of money
(such as the government and the banking system). For the most common definition
of money, the government means the govt. of
Bangladesh and
the
banking system means the BB plus all banks which accept demand deposits. This means that the word public is inclusive of all local authorities, non-bank financial institutions, and non- departmental public-sector
and even the foreign central banks and governments and the International
Monetary Fund who
hold a part of Bangladesh money
in Bangladesh in
the form of 'deposits with
the BB.
In
other words, in the standard measures of money, money held by the government and the banking system is not included.
The
primary reason for measuring the stock of money in this way is that this separates the producers or the suppliers of money from the holders or the demanders of it. For both monetary analysis and policy
formulation, such a separation is essential.
A single measure of money supply defined as the sum of currency and demand deposits, both held by the