Changes in the movement of money on a certain date and for a certain period in financial statistics, monetary aggregates M0, M1, M2, M3, M4 are used.

The M0 unit includes cash in circulation: banknotes, metal coins, treasury notes (in some countries). Metal coins, which make up an insignificant share of cash (2-3% in developed countries), enable individuals to make small transactions. Usually these coins are minted from cheap metals. The real value of the coins is much lower than the face value in order to prevent them from being melted down for a profitable sale in the form of ingots. Treasury notes are paper money issued by the Treasury. The prevailing role belongs to banknotes.

The M1 aggregate consists of the M0 aggregate and the funds on current bank accounts. Account funds can be used for non-cash payments, through transformation into cash and without transfer to other accounts. For settlements using the funds in these accounts, their owners issue payment orders (the predominant form of settlement in the Russian economy) or checks and letters of credit. It is the M1 unit that services operations for the implementation of gross domestic product (GDP), distribution and redistribution of national income, accumulation and consumption.

Aggregate M2 contains aggregate M1, term and savings deposits in commercial banks, as well as short-term government securities. The latter do not function as a medium of exchange, but can turn into cash or checking accounts. Savings deposits in commercial banks are withdrawn at any time and turn into cash. Term deposits are available to the depositor only after a certain period of time and, therefore, have less liquidity than savings deposits.

Aggregate M3 contains aggregate M2, savings deposits in specialized credit institutions, as well as securities circulating on the money market, including commercial bills issued by enterprises. This part of the funds invested in securities is not created by the banking system, but is under its control, since the transformation of a bill into a means of payment requires, as a rule, acceptance by the bank, i.e. guarantees of its payment by the bank in case of insolvency of the issuer.

Aggregate M4 is equal to aggregate M3 plus various forms of deposits in credit institutions.

A balance is necessary between the aggregates, otherwise there is a violation of monetary circulation. Practice suggests that equilibrium occurs when M2 > M1; it strengthens at M2 + M3 > M1. In this case, money capital is transferred from cash to non-cash circulation. If this ratio between aggregates is violated, complications begin in monetary circulation: lack of banknotes, price increases, etc.

In Russia, aggregates M0, M1, M2 M3 are used to calculate the total money supply. The monetary aggregates include; M0 - cash in circulation; M1, except for M0 - funds of enterprises on settlement, current, special accounts in banks, deposits of the population in savings banks on demand, funds of insurance companies; M2; equals M1 plus time deposits of the population in savings banks, including compensation; M3 consists of M2 and certificates, government bonds.

Sincerely, Young Analyst

money supply is the stock of money in the state.

The money supply serves the movement called money circulation.

The totality of all money in a given country with the government, firms, banks, citizens, in accounts, on the road, in wallets, in "stockings", etc. shapes national money supply. Money circulation as a set is divided into cash and non-cash. Non-cash circulation is much higher than cash (Fig. 1):

In countries with an unreliable banking system, the ratio of cash and non-cash money supply looks different (Fig. 2):

The concept of liquidity is used not only in relation to, but also to, the international monetary system, etc. Liquidity in relation to money is their property to be used by their owner for the immediate acquisition of the necessary benefits. Depending on the specific form in which money exists (cash and non-cash), the liquidity of money increases or, conversely, decreases. So, cash is much more liquid than non-cash, and in the non-cash money supply, money on current accounts that can be used by checks, transfers, credit cards, is much more liquid than money on time deposits, since there is a time limit on the latter, during which the account holder does not can use the entire amount of the deposit, but only the interest on it.

• Money in term and savings bank deposits;
• Money on demand deposits (current) checks, bills of exchange, payment orders, credit cards, electronic money, traveler's checks;
• Cash, banknotes, banknotes, treasury bills, small change, securities;

Money Aggregate System

Since 1992, the Russian Federation has moved to the calculation of monetary aggregates.

The money supply is divided by monetary aggregates(from to), which include various types of money.

Monetary aggregates - a grouping of bank accounts according to the degree of speed of transformation of funds in these accounts into cash. The faster the funds in the accounts can be converted into cash, the more liquid the aggregate is considered.

The system of money supply aggregates is "matryoshka", in which each previous aggregate is "inserted" into each subsequent one.

Monetary aggregate М0

To the unit M 0 includes all types of money with a high degree of liquidity.

Different types of money and different types allow you to introduce a certain classification of money, depending on the degree of their liquidity and scope. This found expression in the creation of a system of money supply aggregates used in the analysis of the national systems of money circulation in various countries. The original unit includes cash and checks:

M 0 = C + checks,

where With— initial money supply (cach).

Cash, in turn, consists of paper money, banknotes and tokens.

1st sign. Cash is issued into circulation by the Russian Federation, then the Central Bank of the Russian Federation takes measures to preserve its purchasing power. Thus, cash is a debt obligation of the Central Bank of the Russian Federation, that is, the Central Bank of the Russian Federation guarantees their purchasing power.

2nd sign. Non-cash money on current settlements and other demand and term accounts. These are debt obligations to their customers. At the same time, the Central Bank of the Russian Federation controls and regulates the activities of commercial banks, ensuring the liquidity of commercial banks, that is, the ability to pay their debts.

3rd sign. Banknotes, coins, non-cash money in the form of an entry on accounts in circulation are legal tender. Therefore, they are accepted as payment for contracts according to their functions.

4th sign. Modern money (in the narrow sense of the word) is convenient and acceptable for people to use.

5th sign. M 1 has absolute liquidity, so M 1 banknotes that perform the functions of money.

Monetary aggregate M2

In addition to money, that is, the aggregate, the composition of the money supply includes purchasing and payment means that do not have absolute liquidity. These include bills, bonds, certificates of deposit. In non-cash form: term deposits in bank accounts.

Unit M 2 complements to M 1 term deposits:

M 2 \u003d M 1 + term deposits.

With a term deposit, the account holder transfers his funds to the bank for some time. If necessary, money can be withdrawn from a term deposit before the due date, but the client may experience losses (interest on the deposit has not been paid). This shows that the term deposit is almost money. In the conditions of the Russian Federation, the level of liquidity of the aggregate is close to absolute, therefore, usually, a term deposit is issued to the client on demand.

Funds on time deposits further reduce the liquidity of the aggregate M 2 compared with M 1 and M 0 and involve the maintenance of savings, savings, investments.

Monetary aggregate M3

Unit M 3 involves an increase in the aggregate M 2 at the expense of:

M 3 \u003d M 2 + government securities.

These papers (mainly government bonds) are no longer fully-fledged money, but nevertheless they can be transformed into other types of money (sold on the open market) and, on this basis, they are included in the money supply (Fig. 3).

The structure of the money supply

The structure of the money supply is constantly changing.

In the modern monetary system, the growth rate of the money supply has noticeably decreased and money began to work better. In the Russian Federation, among the shortcomings of the monetary system, one can note a large share of cash (42-65%), while in developed countries this figure barely reaches 7-10%.

The ratio between aggregates changes depending on economic growth.

The change in the money supply is the result of the influence of two factors:

• change in the amount of money in circulation;
• change in their turnover rate.

Change in turnover rate

The velocity of circulation of money is determined using indirect methods:

Velocity of circulation of money in the circulation of income= GDP / Money supply (M1 and M2). This indicator reveals the relationship between economic growth and money circulation.

Cash turnover rate= Arrival according to the forecast of the balance of cash turnover / the average annual value of the money supply in circulation.

Turnover of money in the payment turnover(shows the speed of non-cash payments) = The amount of funds in the settlement, current and probable accounts (bank accounts) / the average annual value of the money supply in circulation.

• general economic factors that show how production is going on, how the cyclical nature of economic development, price increases, growth rates of the most important sectors of the economy are changing;
• monetary factors: what is the structure of the payment turnover (how much cash and non-cash money is involved), the development of credit operations, the development of mutual settlements, the level of the interest rate on the loan;
• the frequency of payments of money and income, the level of savings and savings, the uniformity of spending money.

The effect of inflation on the growth of the velocity of money is explained by the fact that buyers increase their purchases in order to protect themselves from economic losses due to a decrease in the purchasing power of money.

Rules for regulating the structure of the money supply

It is necessary to divide the money supply by , , , if it is necessary to ensure state regulation of the money supply and prevent the unexpected (rising prices).

When circulating money, it is important not only the amount of absolutely liquid money M1, but also the amount of money M2, which can quickly turn into M1. Also M3 may, under certain conditions, become a means of payment M1.

By distributing the money supply to aggregates, the Central Bank of the Russian Federation influences the money supply M1, increasing it or decreasing it (or restraining its growth).

Example. In the event of high inflation, the Central Bank pursues a policy of reducing the M1 money supply. To do this, the Central Bank sells, on behalf of the government, government securities of a large denomination of other firms, banks, i.e. M1 - M3 (the money supply M1 decreases).

For the population, the Central Bank of the Russian Federation sells securities of a smaller denomination and M1 - M2, the money supply M1 decreases.

rule: if the money goes to the banking system for a term deposit or to the budget, the money supply M1 decreases, the money leaves the sphere of circulation M1.

If the Central Bank of the Russian Federation raised the interest rate at which banks are lending, in turn, commercial banks raise the interest rate on time deposits.

It has become profitable for people (depositors) to make time deposits - M2 increases, and M1 decreases - inflation is contained.

For the term of the deposit, the money was placed at the disposal of the banking system (- M2).

Monetization ratio

An important indicator of the state of the money supply is monetization ratio, equal to

The monetization coefficient allows you to answer the question: is there enough money in circulation? It shows how the gross product is backed by money (or how much money is per ruble of GDP).

The monetization coefficient reaches 0.6, and sometimes close to one. In Russia, this figure barely reaches 0.1.

The M0 unit includes cash in circulation: banknotes, metal coins, treasury notes (in some countries). Metal coins, which make up an insignificant share of cash (2-3% in developed countries), enable individuals to make small transactions. Usually these coins are minted from cheap metals. The real value of the coins is much lower than the face value in order to prevent them from being melted down for a profitable sale in the form of ingots.
Treasury notes are paper money issued by the Treasury.
The prevailing role belongs to banknotes.

Monetary aggregate M1

M1 = cash + checkable deposits + checkless savings deposits

The M1 unit consists of the M0 unit and funds on the settlement, special, current accounts of enterprises and organizations, plus the funds of insurance companies, plus demand deposits of the population in commercial banks and the Savings Bank. For settlements using the funds in these accounts, their owners issue payment orders (the predominant form of settlement in the Russian economy), or checks and letters of credit. It is the M1 unit that services operations for the implementation of gross domestic product (GDP), distribution and redistribution of national income, accumulation and consumption.

Factors affecting the monetary aggregate M1

Monetary supply M2

M2 = M1 + small term deposits

Aggregate M2 contains aggregate M1, term and savings deposits in commercial banks, as well as short-term government securities. The latter do not function as a medium of exchange, but can turn into cash or checking accounts. Savings deposits in commercial banks are withdrawn at any time and turn into cash. Term deposits are available to the depositor only after a certain period of time and, therefore, have less liquidity than savings deposits. In the US, the M2 aggregate includes: M1 - 23% (including cash 7% and checkable deposits 19%), savings and term deposits - 74%.

Factors affecting the monetary aggregate M2

1. Market turnover. The revenue of trade organizations, the receipt of revenue from passenger transport depends on its volume and structure.
2. Receipt of taxes and fees from the population.
3. Receipt to accounts on deposits with Sberbank and commercial banks.
4. Cash receipts from the sale of government and other securities.
5. Gold and foreign exchange reserves: their increase creates conditions for an active monetary policy in the open market, in determining the volume of credit resources and allows you to increase the money supply.

Monetary supply M3

M3 = M2 + large term deposits

Aggregate M3 contains aggregate M2, savings deposits in specialized credit institutions, as well as securities circulating on the money market, including commercial bills issued by enterprises. This part of the funds invested in securities is not created by the banking system, but is under its control, since the transformation of a bill into a means of payment requires, as a rule, acceptance by the bank, i.e. guarantees of its payment by the bank in case of insolvency of the issuer.

Aggregate M4 is equal to aggregate M3 plus various forms of deposits in credit institutions.

Aggregates M1, M2, M3, etc. are used as indicators of the money supply in most countries. Different types of assets are grouped depending on the degree of their liquidity. Assets with less liquidity are included in broader aggregates. The boundaries between monetary aggregates are largely conditional, and most of these indicators are no longer money, but "quasi-money".

We believe that when analyzing the money supply, as well as the possible consequences of its change for the Russian economy, the use of the M2 monetary aggregate (according to the calculation methodology adopted by the Bank of Russia) is not always correct, and in some cases can even lead to some confusion.

The Bank of Russia issues cash currency, which we all widely use in circulation, and a certain amount of non-cash rubles, which are presented in the form of funds on correspondent and deposit accounts of credit institutions with the Bank of Russia, balances on accounts of required reserves, investments in bonds of the Bank of Russia. In fact, all these are liabilities of the Bank of Russia, defined collectively as the “monetary base”.

This is where “real money” ends and “quasi-money” begins. There is no “real money” on the same current accounts, they are present there nominally. A demand account is a property title that entitles its owner to own and manage a certain amount of money. To make payments, this asset must first be converted into "real money" using the bank's correspondent account. To ensure the possibility of carrying out operations on current accounts, banks have to keep a certain amount of "real money" on correspondent accounts. For example, 100 million rubles on correspondent accounts of a bank can serve current accounts with a total balance of 1 billion rubles. If there is no money on the correspondent account of the bank, the payment at the request of the client cannot be made, no matter how much money the client has on the current account.

Term accounts are "money" to an even lesser extent. Their difference from current accounts is that if in the first case their owner can own and manage money on demand, and does it often, then in the second case, as a rule, only after the expiration of the deposit period, when he, at his discretion, can exercise payment, withdraw in cash, etc. Therefore, time deposits are used as money less often.

Various financial assets give their owners the right to own and manage a certain amount of "real money", but they are money only nominally. Each time when making payments, the owners of these assets first convert them into “real money” for further transactions.

This is a very important point for understanding modern monetary circulation. Instead of “real money”, you can store any asset, and if necessary, say, making payments, simply convert this asset into money and complete the transaction. The more such operations, the more actively "work" in the economy "real money". The greater the volume of operations "served" by the monetary base or "real money", the more actively this "real money" is involved in circulation. In this case, they say that the higher the value of the money multiplier. Increasing the "intensity of work" of "real money" is equivalent to their increase in the economy. The bank multiplier effect, by the way, is not so harmless in terms of inflationary consequences, as some economists believe.

More liquid assets, such as checking and deposit account balances, are more likely to be converted into money for the purpose of making payments, so they are more money. It is quite justified that they are included in the M2 monetary aggregate, one of the most important monetary aggregates, which is used in the development of economic policy and the establishment of quantitative benchmarks for macroeconomic proportions. The correctness of the conclusions that will be subsequently obtained depends on its reliability.

Money supply (M2) - is the sum of cash in circulation and non-cash funds. The money supply indicator in the national definition includes all funds of non-financial and financial (except credit) organizations and individuals that are residents of the Russian Federation, in cash and non-cash form in rubles.

As you can see, highly liquid securities, including government bonds, bills of exchange and bonds of first-class issuers, are not included either in the M2 monetary aggregate or in the broad money supply. But are they less money than term deposits? Which of these assets is more often converted into money for making payments? The answer is far from clear. In my opinion, highly liquid bonds are no less "money" than term deposits. It is well known that highly liquid securities are held in portfolios as an asset that, in the event of a lack of liquidity, can be quickly sold on the market to receive cash and make payments.

The bond market in some periods reached significant volumes. For example, according to the Central Bank, at the moment only the volume of GKO-OFZ is about 1.5 trillion. rubles. The fact that a significant expansion or contraction of the market for debt instruments does not affect the value of the M2 indicator in any way is a clear distortion of reality.

In Mexico, M2 includes both federal government and central bank securities and highly liquid private securities. The European Union includes in M3 debt obligations up to three years. Japan in the "broad definition of liquidity", in addition to the components of M3, includes commercial paper, repurchase agreements, government bonds, foreign debt securities. Approximately the same procedure for calculating in Korea. Iceland includes in M4 debt securities issued by commercial banks, credit cooperatives, savings banks.

The same applies to cash and funds on accounts (both current and urgent) in foreign currency. Even if we do not allow internal settlements in foreign currency, the frequency and ease of converting these assets into rubles, I think, is no secret to anyone. Funds in foreign currency accounts are included in the so-called "broad money supply". However, economists operate mainly with the monetary aggregate M2. And this can lead to very controversial conclusions. For example, in October 2008, compared with September 2008, the M2 monetary aggregate, based on the statistics of the Central Bank, decreased by 5.94% - from 14.4 trillion. rub. as of October 1, 2008 to 13.5 trillion. rub. on November 1, 2008. Many experts called the decline in money supply growth in October 2008 "very significant", no doubt that sooner or later this will lead to a reduction in inflation. The conversion of ruble assets into foreign currency and, as a result, a decrease in M2 does not yet mean deflationary consequences for the economy. Currency accounts, like ruble ones, are, in fact, quasi-money and contribute to an increase in the "intensity of work" of the monetary base.

Hard currency in cash is generally not taken into account when calculating monetary aggregates. Given the volume of cash dollars and euros in the hands of the population, a significant underestimation of the money supply is obtained. The volume of cash dollars in the hands of the population may increase by $30-40 billion (about 1 trillion ruble equivalent), but monetary aggregates do not reflect this. The specificity of Russia is the large amount of cash dollars in circulation. We believe that they should be taken into account when calculating monetary aggregates.

A number of countries include deposits denominated in foreign currencies in all aggregates. In Norway (just like Russia, excess foreign exchange inflows from exports are accumulated in sovereign funds) cash and deposits (both denominated in national and foreign currencies) are included in M1 and M2. Japan includes foreign currency deposits in M2. In Mexico, dollar deposits are included in all monetary aggregates.

Ideally, a combined monetary aggregate can be calculated, in which various assets would be included, taking into account weight coefficients showing how much an asset plays the role of a means of payment. Less liquid assets are less of a means of payment and more of a store of value. And vice versa. Then the formula for calculating the money supply will look like this: DM = ND + ΣАi*Кi ,

where DM is the money supply;

ND - cash in circulation;

Аi is the value of the financial asset;

Ki is a weighting factor that depends on the frequency of converting an asset into money for the purpose of making payments.

If the weighting coefficient for settlement accounts is taken as 1, then for currency demand accounts its value will be about 0.9, for highly liquid debt instruments - about 0.8, term ruble and foreign currency accounts - about 0.75, etc.

"Combined monetary aggregate" in its economic meaning is similar to the indicator "Money Divisia . However, unlike our proposed expert method for calculating weighting factors depending on the frequency of converting a given asset into “real money”, its developers use a more formal approach to make payments on transactions. A financial asset is considered more liquid depending on the lower the interest rate charged on this financial asset compared to some benchmarking accepted in the country.

The "Money Divisia" indicator has been regularly calculated since 1993, in particular by the Bank of England. Monetary aggregates, calculated as the sum of weighted assets, have not yet been widely used only due to certain difficulties in their calculation.

The advantage of monetary aggregates M1, M2, M3 is the simplicity of their calculation. Nevertheless, even if the Bank of Russia abandons the combined monetary aggregate due to the complexity of its calculation, at least there is a need to adjust the methodology for calculating the M2 monetary aggregate, the most common indicator of the money supply in Russia.

M.P. Tskhovrebov,

candidate of economic sciences,

Analyst at JSC "Bank Petrocommerce"

Listliterature

1. 1. Illarionov A.
2. 2. Monetary and financial statistics: compilation guide - Washington, D.C. // International Monetary Fund. 2008.
3. 3. Yueh-Yun C. O'Brien. Measurement of Monetary Aggregates Across Countries. // Federal Reserve Board, Washington, D.C. 2007

During intra-bank settlements, there is no movement of funds on the correspondent account, i.e. in fact, no preliminary conversion of the current account into "real money" is required. Nevertheless, this does not affect the general course of reasoning and final conclusions.

Although all term deposits are practically revocable under current Russian legislation, their early closure is usually associated with a loss of interest income.

Illarionov A. The nature of Russian inflation. // "Questions of Economics". 1995. No. 3. S. 11.

Named after the French economist François Divisia (1925), who was the first to propose the calculation of this indicator.

Monetary and financial statistics: compilation guide - Washington, D.C. // International Monetary Fund. 2008. P. 184.

Money. Credit. Banks [Answers to examination papers] Varlamova Tatyana Petrovna

7. Monetary aggregates. monetary base

Monetary Aggregates- indicators used in the analysis of quantitative changes in money circulation on a certain date and for a certain period, as well as to develop measures to regulate the growth rate and volume of the money supply.

The main monetary aggregates used in the financial statistics of industrialized countries include the following:

1) unit M 1 - this is money in the narrow sense of the word, the so-called. money for transactions. They include cash (banknotes and coins in circulation and at the cash desks of enterprises and organizations, treasury notes in certain countries) circulating outside banks, as well as money on current accounts (demand accounts) in banks, other checkable deposits, travelers checks, sometimes credit cards. It should be noted that deposits in current accounts perform all the functions of money and can be easily converted into cash. It is the aggregate M 1 that services operations for the implementation of the gross domestic product, the distribution and redistribution of national income, accumulation and consumption;

2) unit M 2 - this is money in a broader sense of the word, which includes all components of M 1, term and savings deposits in commercial banks (usually small and up to 4 years), i.e. savings that are easily convertible into cash, and as well as short-term government securities. The latter do not function as a medium of exchange, but can turn into cash. Savings deposits in commercial banks are withdrawn at any time and turn into cash. Term deposits are available to the depositor only after a certain period of time and, therefore, have less liquidity than savings deposits;

3) unit M 3 includes M 2 , savings deposits in specialized credit institutions, as well as securities circulating on the money market, including commercial bills issued by enterprises. This part of the funds invested in securities is not created by the banking system, but is under its control, since the transformation of a bill into a means of payment requires, as a rule, the acceptance of the bank, that is, a guarantee of its payment by the bank in the event of the issuer's insolvency;

4) unit M 4 includes M 3 and various forms of deposits in large credit institutions. A balance is necessary between the aggregates, otherwise there is a violation of monetary circulation. Practice suggests that equilibrium occurs at M 2 > M 1, it is strengthened at M 2 + M 3 > M 1. In this case, money capital is transferred from cash to non-cash circulation. If this ratio between aggregates is violated, complications begin in monetary circulation (lack of banknotes, price increases, etc.).

In Russia, the following types of money are distinguished:

1) M 0 - includes all money in circulation, paper and metal;

2) M 1 - includes M 0 and funds on settlement, current and special accounts of enterprises and the population, deposits of the population in banks "on demand";

3) M 2 – includes М1 and time deposits of the population in banks;

4) M 3 - includes M 2 and deposit and savings certificates, government bonds.

An independent component of the money supply of the Russian Federation is monetary base. It includes the aggregate M 0 , cash in banks' cash departments, required reserves of banks in the Central Bank of Russia and their funds in correspondent accounts with the Central Bank of the Russian Federation.

The use of various indicators of the money supply allows a differentiated approach to the analysis of the state of money circulation.