M3
Candlefocus EditorHistorically, M3 was largely used by economists and government officials alike to estimate the entire money supply within an economy, as well as inform and direct policy to control inflation over medium and long-term periods. It was essential in tracking the amounts of money being used to purchase goods and services, investments, and savings, with the goal of monitoring inflation to ensure it didn't exceed an acceptable level.
Since 2006, M3 has been largely replaced by money zero maturity (MZM) as the primary measure of the money supply. MZM does a better job of capturing the liquidity of current assets used by households and businesses. It is easier to calculate and update daily, whereas M3 must be updated at least once a month. While MZM is generally accepted as an improved measure of the money supply over M3, M3 is still published as a source of economic data for ease of historical comparisons.
In summary, M3 is an expanding measure of the money supply, beyond M2, that includes large denominations of time deposits, institutional money market funds, short-term repurchase agreements, and larger liquid funds. It is most closely associated with larger financial institutions and corporations than with small businesses and individuals. M3 has largely been replaced by MZM as the primary measure of the money supply, but is still critical in understanding the economy, as well as historical benchmarking.