About the statistics
Name and topic
Name: The money supply M2
Topic: Banking and financial markets
Division for Financial Markets Statistics
Definitions of the main concepts and variables
Monetary base (M0): banks' and the money-holding sector's notes and coins and deposits with Norges Bank. Banks’ deposits with Norges Bank comprise current account (sight) deposits and fixed-rate (time) deposits (F-deposits), from Norges Bank’s monthly balance sheet.
The narrow monetary concept (M1): the money-holding sector's notes and coins (in NOK) and transaction deposit accounts with Norges Bank and banks (in NOK and foreign currency). Note that a change in the coverage of M1 compared with the rest of M2 (see below) has caused a break in the data series for M1 between May and June 2001. Twelve-month growth rates for M1 for this period should therefore not be used.
Note that the changes in the demarcation between M1 and the rest of M2 introduced in November 2000 resulted in breaks in the time series. For that reason, twelve-month growth rates for the period June 2001 to May 2002 should not be compared.
The broad monetary concept (M2): M1 + the money-holding sector's other bank deposits (in NOK and foreign currency), excluding restricted deposits (bank savings with tax credit etc.), but including certificates of deposit. As from the publication of monetary aggregates for May 2006, money market fund shares are included in M2.
Money-holding sector (for M1 and M2): local government, non-financial corporations, households and other financial corporations (i.e. excluding banks and state lending institutions). As from the publication of monetary aggregates for May 2006, money market funds are no longer included in the money-holding sector. The money-holding sector of M0 also includes commercial banks and savings banks.
Money-issuing sector (for M1 and M2): comprises Norges Bank and commercial banks and savings banks. As from the publication of monetary aggregates for May 2006, money market funds are included in the definition of money-issuing sector. The money-issuing sector of M0 is Norges Bank.
Money-neutral sector (for M1 and M2): the money-neutral sector is made up of the same sub-sectors in M0, M1 and M2, and comprises the central government sector, state lending institutions and the non-resident sector.
Earlier changes in the definitions of money supply: from November 2000, the most important change in M1 and M2 was the exclusion of &“Unutilised overdrafts and building loans´´ from both concepts. Changes in the demarcation between M1 and the rest of M2 were made at the same time so that the M1 concept would only comprise notes and coins and deposit accounts that can be used for direct payments without costs other than ordinary transaction fees.
Classifications and sectorisation
The classification of most financial instruments and institutional sectors used for the money supply statistics by Statistics Norway is in line with the MFSM (see section 6.2). The composition of Norges Bank’s foreign assets (including the Government Petroleum Fund) reflects guidelines for the investment of Norges Bank’s international reserves and the Government Petroleum Fund. Against this background, international reserves include substantial amounts of bonds subject to repurchase agreements. Norges Bank currently adheres to the Financial Supervisory Authority of Norway’s regulations that require underlying bonds to remain within bond holdings. This practice deviates from the MFSM, which calls for the deduction of bonds reported from international reserves and recorded elsewhere.
Statistics Norway adheres to Norwegian accounting principles for the valuation of assets and liabilities. These are not fully compliant with the MFSM recommendation that the valuation of assets and liabilities should be carried out on the basis of market prices or market-price equivalents. Market-based financial short-term assets are valued at market price. Other short-term assets are valued at the lowest of acquisition cost and real value. Long-term assets are valued at acquisition cost less depreciation and write-offs.
Loans granted by Norges Bank to the financial sector are valued at nominal values, according to international guidelines. Securities that are part of Norges Bank’s trading portfolio are valued at market prices, also in accordance with international guidelines. A small amount of securities and long-term investments are recorded at nominal value.
The other depository corporations adhere to Norwegian corporate accounting standards that provide for dual valuation; thus, the reporting units in practice report their trading portfolio at market prices (in accordance with international norms) while reporting their longer-term and/or less liquid financial assets (bonds and shares) at book values (not in accordance with the MFSM). On the liability side of the reporting units’ balance sheets, the securities and shares are valued at nominal prices, consistent with international statistical standards .
Deposits and capital on the balance sheets of the depository corporations are valued at nominal value and accrued interest is included in the balance sheets. However, part of the accrued interest is not linked to the separate instruments in the balance sheets, but only registered as a sum of the accrued interest of all instruments. This accrued interest is included respectively in other assets and liabilities. (The MFSM calls for their inclusion with the instruments. However, the international statistical standard &“A System of National Accounts´´ SNA1993 in §§11.101 and 13.81 recommend that accrued interest be recorded separately on loans and deposits).
Loans on the asset side of the balance sheets of the other depository corporations are reported twice, both adjusted and unadjusted for expected loan losses and/or provisions for losses. Contrary to the MFSM, Statistics Norway disseminates only the other depository corporations’ data adjusted for expected loan loss provisions, which is also the definition of loans used in the &“Credit indicator.´´ Statistics Norway believes that this treatment is more consistent with the principle of market values that is recommended in the MFSM. However, the loan concept will be evaluated.
Financial derivatives are reported by the other depository corporations as part of their balance sheet data, and derivatives that are part of the trading portfolio are valued at market or fair value, consistent with the MFSM. However, some financial derivatives are not reported separately. The latter amounts are disseminated together with other assets and other liabilities. According to the MFSM, financial derivatives should be specified as a separate instrument.
With regard to the recording of value and volume changes, Statistics Norway has adopted the MFSM methodology for compiling both stock and flow data, and has developed recording procedures for transactions, revaluations, and other changes in the volume of assets (OCVA). The exclusion of loan losses from OCVA in the credit indicators is an exception.
Recording is done on an accrual basis
In its own balance sheet, Norges Bank uses transaction dates (trade dates) when determining outstanding foreign currency resources and flows. Unsettled purchases and sales of foreign securities are counterbalanced by net receivables presented under foreign deposits (for international reserves this is also done when net receivables/liabilities are negative so as not to increase the value of international reserves).
In accordance with accounting regulations and practice within other depository corporations, interest payable and interest receivable are recorded in the balance sheet as interest accruals.
In line with the general principles of the MFSM, assets and liabilities of Norges Bank and all other depository corporations are collected and subsequently compiled on a gross basis. Receivables from particular transactors are not netted against liabilities to those transactors.
In the compilation of the sectoral balance sheets of Norges Bank and other depository corporations, the data on financial assets and liabilities are aggregated into major categories (e.g. receivables classified by debtors and deposits classified by creditors.) Whilst compiled and generally available on a gross basis, many categories of monetary data are presented on a net basis in surveys and other presentations of data because of the analytical usefulness of the data in this form, for example, net credit to government and the state lending institutions.
Only at national level
Frequency and timeliness
Reporting to the IMF/IFS and the BIS, as well as data are posted on Statistics Norway’s website under &“Economic Indicators´´.
The original data and the revised micro data are stored in accordance with Statistic Norway's standard for file storage (DataDok).
Background and purpose
The purpose is to contribute to the basis of information for the monetary policy. The statistics were established by Norges Bank in 1971 and reorganised in line with the IMF standard in connection with the publication of data for November 2000.
Norway complies with the IMF's Special Data Dissemination Standard, which obliges Norway to publish a detailed overview of the money supply.
After Statistics Norway took over most of the work involved in collecting and publishing financial statistics from Norges Bank on 1 January 2007, the money supply statistics work was also transferred to Statistics Norway.
Users and applications
Monetary authorities, i.e. Norges Bank and the Ministry of Finance. Other important users are the financial markets and research institutions.
Coherence with other statistics
The statistics are based on the guidelines in the System of National Accounts (SNA 1993), European System of Accounts (ESA 1995), IMF’s MFSM and Balance of Payments Manual from 2002.
Derived statistics, without direct Council Directives or Council Regulations from the EU.
The population consists of Norges Bank, commercial banks, savings banks and money market funds. With reference to the Standard Industrial Classification, this includes the industries 65.11, 65.12 and the part of 65.231 including money market funds.
Data sources and sampling
The consolidated balance sheet of the money-issuing sector (see section 4.1) (the Depository Corporations Survey), which is the main source for the money supply statistics, comprises all banks (Norges Bank, commercial banks and savings banks) and money markets funds.
In the compilation of the certificates of deposits broken down by sectors, The Norwegian Central Securities Depository (VPS) and The National Insurance Scheme Fund are used as additional sources. Notes and coins in circulation are broken down by sectors as in the quarterly financial accounts.
The exchange rate revaluations used in the monetary aggregates are compiled by combining data from the Depository Corporations Survey, official exchange rate data and data from the quarterly survey of the banks’ assets and liabilities broken down by currencies (the quarterly BIS survey).
The money supply statistics are, in principle, based on total censuses. This applies to data collected from Norges Bank, commercial banks, savings banks and Statistics Norway’s quarterly statistics on mutual funds. Data for non-quarterly months are estimated by combining interpolation between the quarterly data with monthly data from the Norwegian Mutual Fund Association (see http://www.vff.no/ ).
Collection of data, editing and estimations
On 1 January 2007, Statistics Norway took over the responsibility for collecting accounting data for the &“65´´ industries. Data for the money supply statistics are collected from Norges Bank, commercial banks, savings banks, mutual funds (quarterly) and the Norwegian Mutual Fund Association (monthly).
The revisions of the financial institutions’ accounting statements are undertaken by Statistics Norway and the Financial Supervisory Authority of Norway.
The revision policy is to disseminate revisions of the previous month’s data together with the current month’s data. Statistics Norway is fully prepared to make revisions in a timely manner, with appropriate notification to users and the media, should it be deemed necessary by the magnitude of a past error, or, owing to other exceptional circumstances. Some of the reported data may contain preliminary data that are subsequently revised.
Calculations of counterparts to broad money (M2)
A new method for calculating the counterparts to broad money (M2) was implemented in the publication of monetary aggregates for November 2000. The new method is based on the &“ Monetary and Financial Statistics Manual ´´ (MFSM) of the International Monetary Fund (IMF) and called &“Depository Corporations Survey´´ in the manual.
The principal analytic framework used is the survey of monetary stock data called &“Counterparts to broad money (M2)´´. The Depository Corporations Survey is the consolidated balance sheet of Norges Bank and the commercial and savings banks. The consolidated balance sheet of the money-issuing sector is obtained by adding the balance sheets of the banking sectors, excluding intra-sector financial claims and liabilities. The monetary concepts are obtained by adding up the relevant liabilities of the money-issuing sector vis-à-vis the money holding sector. The Government Petroleum Fund is included in the official accounts of Norges Bank, but is not included in the consolidated balance sheet. The Government Petroleum Fund is classified in the government sector.
Concepts and definitions used by Norges Bank to compile monetary statistics all conform, with some exceptions (described below), to the guidelines outlined in the MFSM. The method shows how stocks and changes in stocks of broad money (M2) can be explained by changes in a consolidated balance sheet of the money-issuing sector. The consolidated balance sheet contains the following main items:
I. Net foreign assets
II. Net receivables from the government sector and the state lending institutions
III. Gross receivables from the money-holding sector
IV. Broad money (M2)
V. Other items (net)
Broad money (M2) is the sum of the counterparts I, II, and III, minus V, in the consolidated balance sheet.
The main items are calculated as follows:
Net foreign assets are compiled by adding the net foreign assets of the money-issuing sector. Share capital and other equities held by the money-issuing sector are not included in this item.
Net receivables from the government sector and the state lending institutions are compiled by adding the money-issuing sector’s net stock of certificates (including Treasury bills), bonds and loans issued by the government and the state lending institutions, minus the government’s and the state lending institutions’ deposits with the money-issuing sector (excluding the Government Petroleum Fund’s deposits with Norges Bank).
Gross receivables from the money-holding sector are compiled by adding the money-issuing sector’s stocks of certificates, bonds, loans, shares and other equities issued by the money-holding sector.
Other items net are compiled by adding net income, shares and other equities, and other liabilities net that are not included in I, II, III or M2.
The methods of calculating growth rates
All growth rate calculations based on holdings that include foreign currency deposits are adjusted for exchange rate fluctuations in order to eliminate all changes not related to transactions. The growth rate calculations are also adjusted for statistical breaks that are not attributable to transactions or valuation changes.
The most commonly used growth rate concept in the money supply statistics is the 12-month growth rate of non-seasonal adjusted stock data, adjusted for revaluations and breaks in the series.
Growth based on the three-month moving average is defined as growth in average money stocks (seasonally-adjusted figures) in the latest three-month period in relation to the previous three-month period adjusted for exchange rate valuation changes and statistical breaks as an annualised figure. The calculation is centred, i.e. the observation is set at the middle month of the latest three-month period.
The seasonal adjustments of the monetary aggregates are carried out using the X12 Arima (version 0.2.7) program. Seasonal components are calculated for one year ahead, when publishing data for January. Revisions of the components for previous periods are also carried out when publishing the January figures. Seasonally adjusted volume figures for previous periods and growth rates based on such figures are thus affected.
Comparability over time and space
The revision of international standards and major changes in accountancy laws may result in a gap in the time series data. A change of sectors may have the same result, for instance if a financial enterprise moves from one sector to another. We try as far as possible to make adjustments for statistical breaks in our calculations of transactions (break corrections).
Sources of error and uncertainty
The money supply statistics are mainly derived from the financial statistics and the mutual funds statistics. Errors and inconsistencies in these statistics will also affect M1 and M2. In this context, we refer to the sections on measurement and processing errors from these statistics. In addition, errors may occur in the estimated data on money market funds for the non-quarterly months, see 3.3 above.
The response rate for the money supply statistics is 100 per cent.