Jane Dotson
The Federal Reserve in the United States is the policy-making body that regulates the money supply. It tracks the money supply from month to month and uses tools to keep the economy growing at a reasonable pace. M3 is a classification of money that includes all other classifications: M0, M1, and M2, and other components of the money supply. While the Federal Reserve no longer tracks M3, it was traditionally used by economists to estimate the entire money supply within an economy and by governments to direct policy and control inflation over medium and long-term periods.
| Characteristics | Values |
|---|---|
| M3 Reporting Status | Discontinued in 2006 |
| M3 Definition | Congregation of all other classifications of money (M0, M1, and M2) plus all of the less liquid components of the money supply |
| M3 Components | M2, large time deposits, institutional money market funds, short-term repurchase agreements, and larger liquid funds |
| M3 Usage | Used by economists to estimate the entire money supply within an economy and by central banks to direct monetary policy and control inflation, consumption, growth, and liquidity over medium and long-term periods |
| M3 vs. M2 | M3 includes M2 plus long-term deposits |
| M3 vs. M1 | M3 includes M1 and is less liquid |
| M3 vs. M0 | M3 includes M0 and is less liquid |
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What You'll Learn
M3 is no longer tracked by the Federal Reserve
M3 is a measure of the money supply that includes M2 as well as large time deposits, institutional money market funds, short-term repurchase agreements, and larger liquid assets. It is the broadest measure of an economy's money supply. M3 was traditionally used by economists to estimate the entire money supply within an economy and by governments to direct policy and control inflation over medium and long-term periods.
In the United States, the Federal Reserve, also known as the Fed, is the policy-making body that regulates the money supply. Its economists track the money supply over time to determine whether too much money is flowing, which can lead to inflation, or too little money is flowing, which can cause deflation. The Fed has a few tools it can use to keep the economy growing at a reasonable pace.
The Federal Reserve used to track three distinct numbers on the nation's money supply: M1, M2, and M3. However, in 2006, the Fed stopped publishing M3 data and only reported on M1 and M2. The Federal Reserve announced in 2005 that they would cease publishing M3 statistics in March 2006, explaining that M3 did not convey any additional information about economic activity compared to M2 and thus was not useful in its analysis. Therefore, the costs to collect M3 data outweighed the benefits the data provided.
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M3 includes all other money classifications
The money supply, also referred to as the money stock, has many classifications of liquidity. M3 is a classification of money that includes all other money classifications: M0, M1, and M2, as well as other components of the money supply. M0 refers to the currency in circulation, such as coins and cash. M1 includes M0, demand deposits (e.g. checking accounts), traveller's cheques, and currency that is out of circulation but readily available. M2 includes all of M1 (and all of M0) plus savings deposits and certificates of deposit, which are less liquid than checking accounts.
M3 is the broadest measure of an economy's money supply. It includes M2, large time deposits, institutional money market funds, and short-term repurchase agreements. M3 emphasises money as a store of value rather than a medium of exchange, hence the inclusion of less liquid assets. These less liquid assets are those that are not easily convertible to cash and therefore not readily available if needed right away.
M3 was traditionally used by economists to estimate the entire money supply within an economy and by central banks to direct monetary policy to control inflation, consumption, growth, and liquidity over medium and long-term periods. However, the Federal Reserve decided that M3 added no real information of importance and was no longer useful in its analysis. As a result, the Federal Reserve ceased publication of M3 data in 2006, only publishing data on M1 and M2.
Despite the Federal Reserve's discontinuation of M3, other sources continue to publish the figures. The Federal Reserve Bank of St. Louis and some other sources still release M3 figures for economic data purposes. Additionally, some of the data used to calculate M3 are still collected and published regularly, and current alternate sources of M3 data are available from the private sector.
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M3 is the broadest measure of the money supply
M3 is a classification of money that includes all other money classifications: M0, M1, and M2, plus other components of the money supply. M3 is the broadest measure of the money supply, emphasising money as a store of value rather than a medium of exchange, hence the inclusion of less liquid assets. These less liquid assets are those that are not easily convertible to cash and therefore not readily available for immediate use. M3 is closely associated with larger financial institutions and corporations rather than small businesses and individuals.
M3 was traditionally used by economists to estimate the entire money supply within an economy and by central banks to direct monetary policy in order to control inflation, consumption, growth, and liquidity over medium and long-term periods. It was also used by governments to direct policy and control inflation. However, the US Federal Reserve stopped publishing M3 data in 2006, explaining that it did not convey any additional information about economic activity compared to M2 and, thus, was not useful in its analysis.
M0 refers to the currency in circulation, such as coins and cash, and is the most liquid measure of the money supply. M1 includes M0, demand deposits, such as checking accounts, traveller's cheques, and currency that is out of circulation but readily available. It is often referred to as "narrow money" and is commonly synonymous with money supply in reports from the financial media. M2 includes M1 plus savings accounts, time deposits (usually under $100,000), and retail money market funds.
M3 includes M2 plus large time deposits in banks, institutional money market funds, short-term repurchase agreements, and larger liquid funds. M3 data is still collected and published by the private sector, and the Federal Reserve Bank of St. Louis and some other sources still publish M3 figures for economic data purposes.
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M3 is not federally insured
M3 is a classification of money that includes all other money classifications: M0, M1, and M2, as well as other components of the money supply. M3 is no longer tracked by the US central bank, the Federal Reserve, or the Fed. The Fed stopped publishing M3 data in 2006, though it is still printed for historical comparisons by other sources.
M3 is the broadest measure of an economy's money supply. It includes M2 plus large time deposits, institutional money market funds, short-term repurchase agreements, and larger liquid funds. M3 is closely associated with larger financial institutions and corporations rather than small businesses and individuals. M3 was traditionally used by economists to estimate the entire money supply within an economy and by central banks to direct monetary policy to control inflation, consumption, growth, and liquidity over medium and long-term periods.
M3 is not included in the Federal Reserve's reports on money supply. The Federal Reserve decided that M3 added no real information of importance and was no longer useful in its analysis. The Fed concluded that M3 did not convey any additional information about economic activity compared to M2 and, thus, "has not played a role in the monetary policy process for many years." Therefore, the costs to collect M3 data outweighed the benefits the data provided.
M1, M2, and M3 are measurements of the US money supply, known as the money aggregates. M1 includes money in circulation plus checkable deposits in banks. M2 includes M1 plus savings deposits (less than $100,000) and money market mutual funds. M3 includes M2 plus large time deposits in banks.
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M3 includes M2 plus large time deposits
In the United States, the Federal Reserve, or the Fed, is the policy-making body that regulates the money supply. The money supply is the entire stock of a nation's currency and other liquid instruments in circulation at a given time. The Fed tracks the money supply from month to month and influences it through actions that increase or decrease the amount of cash in the system.
M1, M2, and M3 are measurements of the US money supply, known as the money aggregates. M1 includes money in circulation plus checkable deposits in banks. M2 includes M1 plus savings deposits (less than $100,000) and money market mutual funds. M3 includes M2 plus large time deposits in banks. M3 is no longer reported separately by the Fed, which decided that it added no real information of importance to the numbers and was no longer useful in its analysis.
M1 is the most frequently reported headline number. It includes coins and currency in circulation, as well as checkable (demand) deposits, savings deposits, and traveller's checks. M2 is all of M1 plus money invested in short-term assets that mature in less than a year, like some certificates of deposit. M2 also includes money market funds and other time deposits.
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