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South African Reserve Bank

Release of Newly Calculated Monetary Aggregates 

The monetary aggregates, particularly M2 and M3, have been revised to include negotiable promissory notes. The monetary aggregates have always included negotiable certificates of deposit but excluded promissory notes. In the recent past, negotiable promissory notes have gained considerably in importance and have emerged as an extremely close substitute for negotiable certificates of deposit (NCDs). The popularity of promissory notes was enhanced by the repeal of stamp duty on such notes in 2003.

After careful consideration of these facts it was concluded that in substance the shift to negotiable promissory notes from NCDs does not signal a true reduction in the public’s underlying holdings of monetary deposits. Accordingly, negotiable promissory notes held by domestic non-bank private-sector parties are now included in the monetary aggregates. The estimates of the monetary aggregates have been revised back to December 2001. The private banks fully cooperated in the revisions by submitting the relevant data.

The revised data are presented and discussed in a note on pages 82 to 85 of the March 2004 Quarterly Bulletin of the South African Reserve Bank.

It should further be noted that the repeal of stamp duty on negotiable certificates of deposit as announced in the February 2003 Budget, effective from April 2004, may cause a swing back to negotiable certificates of deposit. Due to the revised methodology for calculating the monetary aggregates such a swing would no longer have an impact on their values.
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