Money classification & fiscal, monetary policy is described with the effects on the variables like exchange rate, interest & inflation rates of a country. The major money groups as part of the savings accounts & deposits with central & other commercial banks are interpreted in order to classify the money.

1. 10/11/2015
Money Classes & Fiscal, Monetary Policy
M0
Circulation
Fiscal
Policy
Credit Controls
i
Inter bank Lending
& Deposit rates
described by the
“spread”
Notes
& Coins
Monetary
Policy
Employment
Index /Ratio
Government spending /
expenses
Income
distribution
Open market
operations
Printing more
money
Monetary sector
requirements
Bank rate
2Reserves
CRR & SLR
Current
Inflation
PRICE LEVEL
Interest rate
Taxation
Obsolete in some countries
Refers to the minimum
value of assets held in
form of cash with
respect to the total
assets for central &
commercial banks &
measure of liquidity
Banks
RBI
3Others
Deposits
National savings
Money market
instruments
M1
M2
M3= M1 +
M3’ = M3+
M4 = M1+
M5= M4 +
ii
Liquidity from 1Exchange
market transactions
Inflation
Interest
rate
Taxation
+-
-
+
Spending /Liquidity
Exchange rate
IMF threshold
1. From the trading of the shares, &
other marketable securities
2. Includes the foreign exchange held
abroad, in the form of depository
receipts etc which are variable
3. Means commercial & merchant
banks
+
Balances with RBI
Bills of
exchange
Others
Interest
Non interest M2
Building society, M2, M5
Private sector bank - M3 , M1, M4
Foreign currency M3’
Certificates of deposits M3
Deposits
GDP/
GNP
Budget
Multiplier
÷
Status Quo
Narrow money
Broad money
Repurchase rate & Priority
sector lending
iii