Monetary Weight and Monetary Aggregates

Monetary mass and monetary aggregates are concepts interconnected and interdependent.

The money mass is a collection of payment, purchasing and accumulated funds belonging to physical, as well as legal entities and the state itself, involved in the process of servicing economic ties. The money supply characterizes the movement of money according to the quantitative indicator.

Under the weight of money understand both cash and non-cash funds. In structure, it is divided into the active part (those funds that serve the economy) and the passive part (accumulations and balances in bank accounts, which are potential settlement facilities).

The mass of money is not simple and does not coincide with cash. In fact, the share of cash in the mass of money is not so great, since all business entities make deals among themselves on the basis of non - cash payments through bank accounts.

The level of development of the country determines the stability of money circulation and the share of cash in the total mass of money. For example, in the USA this indicator does not exceed 5-10%, with the CIS countries - 30%. The more cash in the total mass of the country's money, the less flexible is the monetary system itself. The money supply and monetary aggregates should be in the right ratio to ensure the normal functioning of the monetary system.

As part of the mass of money are allocated components that can not be directly used as payment and purchasing means. These are funds on time accounts, deposits, savings deposits, shares, etc. They are called "quasi-money" (from Latin "almost"). This part of money in the overall structure of money turnover is a very significant and significant part.

The structure of the mass of money and its composition is constantly changing. At different stages of the development of commodity exchange and payment relations, it was different. With gold circulation at the beginning of the last century, the structure of the mass of money in developed countries was approximately the following: 40% were gold coins, 40% banknotes, 10% balances on accounts of various types of credit institutions. Immediately before the First World War, these indicators respectively changed: 15%, 22%, 67%.

To analyze the movement of money and changes in this process over a certain period, the money supply and monetary aggregates of various categories are used.

Monetary aggregates are indicators of the amount of money or financial assets that a lot of money consists of.

The money supply and monetary aggregates are intertwined in this sense. The so-called aggregates represent a stepwise hierarchical structure in which each subsequent aggregate includes the previous ones. Each subsequent indicator at the same time includes less liquid assets. They are expressed by such concepts as monetary aggregates m1 m2 m3, m4, and also m0.

Unit M0 - cash, in circulation (coins, banknotes, treasury notes).

The unit Ml includes the unit M0 and funds on the current accounts used for non-cash settlements.

The M2 unit includes Ml and deposits in commercial banks, short-term government securities, which can become cash or check accounts.

The MH unit includes M2 and savings deposits in credit institutions, as well as money market securities.

The M4 unit includes M3 and deposits with credit institutions.

Monetary aggregates in Russia for calculating the money supply are of the following order: they are M0, Ml, M2 and M3. The money supply of Russia is characterized by a high share of cash, and this trend is not going to decline. The money supply and monetary aggregates of Russia for a more promising development of the monetary system must go into the mainstream of the greater weight of non-cash settlements.