Factors Underlying the Definition of Broad Money: An Examination of Recent U.S. Monetary Statistics and Practices of Other Countries
International Monetary Fund, Mar 1, 2003 - Business & Economics - 36 pages
The paper examines the experiences of countries in defining monetary aggregates, particularly those countries that have undertaken substantial redefinitions. It finds that both the functional and empirical approaches are important; and that monetary definitions tend to be dynamic in nature, becoming prone to revisions whenever the current definition no longer satisfies both criteria. While countries may adhere to both approaches, monetary definitions may still vary across countries, reflecting specific institutional settings and the requirements of the empirical approach. This finding supports the approach in the IMF''s Monetary and Financial Statistics Manual of not prescribing specific definitions of broad money.
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approaches to defining asset type bank and nonbank Bank of England bond and equity broad money building societies characteristics of transactions checkable deposits classified in M2 close substitutes defining money definition of money definitions of broad demand accounts demand deposits demand for M1 denomination time deposits deposits at banks empirical approaches empirically stable Euro Area Eurodollar Eurosystem financial assets functional and empirical functional approach functional coverage interest-bearing liquid assets M1 and M2 M2 aggregate M2 and M3 M2 assets M3 includes MFSM MMMF shares MMMFs and overnight monetary aggregates monetary definitions monetary policy monetary targeting money-issuing institutions moneyness mutual funds nonbank thrift institutions noninterest-bearing opportunity cost original maturity overnight RPs pass the empirical payment methods policymaking redefinitions reflect repurchase agreements retail MMMFs share draft accounts shift small-time deposits stable and predictable Sterling M3 Thorp and Turnbull transactions accounts transactions balances type of institution union share draft United Kingdom