Monetary aggregates are nested measures of money. M0 covers currency outside banks; broader measures add specified deposits. Each is a stock on a particular date, not the value of payments made during a month.
In CBAR statistics, M1 adds manat demand deposits to M0. M2 adds manat time deposits, and M3 adds foreign-currency deposits expressed in manat. Coverage follows CBAR’s definition of deposit holders. Definitions elsewhere can differ: the same label does not guarantee the same contents.
| Measure | Coverage |
|---|---|
| M0 | Currency outside banks |
| M1 | M0 + manat demand deposits |
| M2 | M1 + manat time deposits |
| M3 | M2 + foreign-currency deposits |
Suppose an economy has AZN 100 in cash outside banks, AZN 50 in current accounts, AZN 30 in manat time deposits and foreign-currency deposits worth AZN 20. M0 is 100, M1 is 150, M2 is 180 and M3 is 200. Adding the four results would count the same money repeatedly. These are hypothetical figures.
When someone deposits AZN 100 in cash into a manat current account, currency outside banks falls and the deposit balance rises. Other things equal, that transfer alone does not increase M1 or the broader aggregates. It changes the form of money. A fall in M0 therefore need not mean that total money supply is shrinking.
The foreign-currency component can behave differently from manat balances. Its manat value also changes with exchange-rate revaluation, not just deposits and withdrawals. Explaining a divergence requires components measured on matching dates. Two growth rates alone cannot establish that households are rushing to buy dollars.
Identify the aggregate, the balance-sheet date and the comparison: last month, December or the same month a year earlier. Then distinguish cash, demand deposits and time deposits. A July-end observation does not become September data because the story was published in September.
Higher M2 does not guarantee cheaper loans or greater wealth for every resident. Funding costs, risk and bank terms matter for lending rates; prices matter for purchasing power. Monetary stocks are useful evidence, but they cannot replace income, credit and inflation indicators.
No. Cash outside banks differs from total currency issued, including cash held in bank vaults.
Only after checking components, coverage, currency valuation and dates. National definitions of broad money differ.
The explainer is checked against these institutional and industry sources. Links open the original material.