Monetary aggregates: what it is – Dictionary of Economics

Concept of monetary aggregates

Variables that quantify the money existing in an economy and that central banks usually define to carry out analysis and decision-making on monetary policy. The Eurosystem has defined three monetary aggregates for the euro area:

– M1, made up of bills and coins in circulation (cash in circulation) and demand deposits. – – – M2, made up of the liabilities included in M1, plus term deposits of up to two years and deposits redeemable at notice of up to three months.

– M3, which includes the liabilities included in M2 plus repurchase agreements, shares in money market funds and money market instruments and fixed-income securities of up to two years, issued by monetary financial institutions. The M3 monetary aggregate is the most stable, therefore it has been chosen by the Eurosystem, within its monetary policy strategy, to define a reference value for money growth.

Origin: Bank of Spain