Narrow money (M1) includes currency, i.e. banknotes and

coins, as well as balances which can immediately be

converted into currency or used for cashless payments, i.e.

overnight deposits.

"Intermediate" money (M2) comprises narrow money (M1) and,

in addition, deposits with a maturity of up to two years and

deposits redeemable at a period of notice of up to three

months. Depending on their degree of moneyness, such

deposits can be converted into components of narrow money,

but in some cases there may be restrictions involved, such

as the need for advance notification, delays, penalties or

fees. The definition of M2 reflects the particular interest

in analysing and monitoring a monetary aggregate that, in

addition to currency, consists of deposits which are liquid.

Broad money (M3) comprises M2 and marketable instruments

issued by the MFI sector. Certain money market instruments,

in particular money market fund (MMF) shares/units and

repurchase agreements are included in this aggregate. A high

degree of liquidity and price certainty make these

instruments close substitutes for deposits. As a result of

their inclusion, M3 is less affected by substitution between

various liquid asset categories than narrower definitions of

money, and is therefore more stable.