Federal Reserve Chairman Paul A. Volcker announced a new set of money supply measurements yesterday designed to help maintain control.
The new measurements redefine the old ones and are broken down into the following categories: M-1A, M-1B, M2, M3 and L, for liquid assets.
The board said the changes were necessary because of new financial innovations that affect growth of the money supply, such as the emergence of so-called NOW accounts, automatic transfer services (ATS), money market mutual funds, and a growing similarity between deposits in commercial banks and thrift institutions.
The new measures are:
M-1A, currency plus demand deposits at comericial banks; It is essentially the same as the old M1, except that it excludes demand deposits held by foreign banks and official institutions.
M-1B, which includes M-1A plus other checkable deposits at all depository institutions -- including NOW accounts, ATS, credit union share drafts and demand deposits at mutual savings banks.
M2, which includes M-1B plus savings and small-denomination time deposits at all depositary institutions, including overnight repurchase (RPs) agreements at commercial banks, overnight Eurodollars held by U.S. residents other than banks at Caribbean branches of member banks, and money-market mutual fund shares.
M3, which includes M2 plus large-denomination time deposits at all depository institutions and term RPs at commercial banks and savings and loan associations.
L, a broad measure of liquid assets, equaling M3 plus other liquid assets not included elsewhere -- such as term Eurodollars held by U.S. residents other than banks, bankers acceptances, commercial paper, Treasury bills and other liquid Treasury securities and U.S. Savings Bonds.
The information on M-1 A and B will be released weekly, on Fridays, while M2 and M3 will be released monthly, in mid-month for the previous month.