The New Monetary Aggregates
A number of major financial innovations over the last decade have changed the composition of assets used by the public to make payments. Examples include the introduction of negotiable orders of withdrawal (NOW accounts), the implementation of automatic transfer systems whereby funds from savings accounts can be automatically transferred to checkable deposits, the growing use of money market mutual funds as substitutes for conventional savings accounts, and the dramatic growth in repurchase agreements. Because of these and other developments, it increasingly was argued that the existing monetary aggregates did not measure the true financial position of the public and, therefore, were inadequate tools of monetary policy. In response to these developments, the Federal Reserve Board recently announced redefinitions of the monetary aggregates. This article describes the new aggregates, compares them to the old measures, and discusses some technical issues involved in their measurement.