Broad Monetarism and UK NGDP
There’s long tradition of “broad monetarism” in the UK, a theory which holds that a) central banks should aim to stabilise some measure of the broad money supply, and b) such measures of money are both predictive and “lead” the nominal economy with some lag.
Steve Hanke has a series of blog posts (for example here and here) showing a collapse in the Bank of England’s “M4” measure of UK. Active UK-based broad monetarists include Tim Congdon and Simon Ward, and many members of the IEA’s Shadow Monetary
HawksPolicy Committee have a broad monetarist leaning. (A few on the SMPC such as Anthony Evans and Jamie Dannhausert do also look at NGDP.)
In recent years, as in the 1980s, broad money has not been strongly correlated with nominal GDP growth, because the velocity of circulation has not been constant. It also remains hard to pick a “useful” measure of broad money. The Bank of England itself dropped the focus on the M4 series which Steve Hanke referenced, in favour of a new series, “M4ex“, which excludes deposits in certain financial intermediaries – think the “shadow banking” sector.
Here is a graph of M4ex growth and nominal GDP growth:
And here’s the graph of M4ex velocity: