Over the last five years, the narrower monetary aggregates have tended to grow more rapidly than their more broadly defined counterparts. In particular, the monetary base grew faster than M1, which in turn grew faster than M2. One contributor to this phenomenon may have been the rapid increase in the amount of currency held outside the U.S. over this period. Since currency represents a larger fraction of the monetary base than, say, M2, rapid growth in currency will have a more noticeable impact on the narrower aggregates.
Suggested citation: “Monetary Policy,” Federal Reserve Bank of Cleveland, Economic Trends, no. 96-11, pp. 02-04, 11.01.1996.