Money Supply

A money supply , on the level of a country or an economic zone, is a whole of values likely to be converted into liquidities. There are various levels: first is composed of the assets liquid likely to be immediately usable to carry out payments (see Means of payment).

The money supply of an economy is composed of several aggregates: M = F + FD + Dt + nominal burnup, where M is the money supply, F the fiduciary Monnaie, FD represents the sight deposits, Dt the term deposits and nominal burnup the negotiable Evidences of indebtedness.

Recalls on the Currency

See also: Currency

For one long period the currency consisted of noble metals, (gold, money). It is what one called the coin, which completely disappeared after the First World War.

The tickets and the coins (the Species) constitute only one fraction of the currency in circulation: the Representative money represents some now more than 90%. This last form of currency is exchanged by simple dummy entry.

If the central bank produces the fiduciary currency, in fact the trade banks create the representative money by granting appropriations under the aegis of the central banks. " The appropriations make the dépôts" , according to a simplifying proverb however.

Tools of regulation of the money supply

The central banks can make by lawful measurement vary these money supplies: by authorizing the banks to lend a more or less large proportion of the funds which they have in deposit, it is possible for example to vary the quantity of liquidities in circulation. A tool more current is to vary its directing Taux which affects the rate of the loans (and the saving) banking

Statistical aggregates

In addition, as indicated in introduction, there are several levels of statistical aggregates in the money supply, according to the degree of liquidity.

  • M1 corresponds to the tickets, parts and sight deposits.
  • m2 corresponds to M1 + the fixed term deposits lower or equal to 2 years and the deposits together with a notice of refunding lower or equal to 3 months (ex: young booklet, CODEVI)
  • m3 corresponds to m2 + negotiable instruments on the money market emitted by the sector of the IFM (monetary financial institution), asset of which the degree of liquidity is high with little risk of loss of capital in the event of liquidation (ex: OPCVM). Example: titrate, certificate of deposit

March 23rd, 2006, the Council of the governors of the Federal fund of the United States ceased the publication of the monetary aggregate m3 (communicated). However this site continues to estimate it.

The ECB publishes the monetary aggregates of the euro area.

See too

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