Monetary Aggregates: M1, M2 and M3
Analysis of the growth rate movement
• All the calculations are done by using the following formula of growth rate;
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑦𝑒𝑎𝑟−𝐵𝑎𝑠𝑒 𝑦𝑒𝑎𝑟
𝐵𝑎𝑠𝑒 𝑦𝑒𝑎𝑟 X 100
• Starting from the first base year; 2015
• The line graph below shows the movement of the growth rates for 2016-2019.
• The y-axis denotes the years while we have the percentage on the x-axis.
If we talk about M1 which comprises of notes in circulation and transferable deposits. An
increase in the circulation of currency signals to inflationary pressures. We can see that the
growth rate in 2016 was 16.05% which reduced to 9.90% in 2019, and kept on declining in
the middle years while M1 is increasing. It is because the banks are lending more and