When considering $M_{0}$, $M_{1}$ etc, there is something called "overnight deposits" which throws me off since one can withdraw money at any time from ones bank account and so what one has on ones account should not be considered overnight deposits?

Furthermore there is the overnight repo operations between banks which are HUGE amounts of money and collecting them into $M_{1}$ seems..not constructive...since the two things are completely different

So whats the deal here? what are overnight deposits in this context?

  • $\begingroup$ You should specify what country you are referring to. Different countries have different definitions. As for “overnight deposits,” it’s probably referring to wholesale lending. $\endgroup$ – Brian Romanchuk Sep 12 '20 at 16:25
  • $\begingroup$ @Brian Romanchuk It is the US anf EU What is wholesale lending? $\endgroup$ – user123124 Sep 13 '20 at 3:08

Not all deposits can be withdrawn at any time without penalty or notice. Consider, for example, CDs. Deposits that can be withdrawn at any time without delay or penalty (checking and deposit accounts but not savings accounts, which you’ll notice usually take a couple days to get your money from) are “overnight deposits” and are included in M1. Term deposits and savings accounts, etc., are added to M1 to calculate M2.


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