Introduction to Money and Banking

Monetary statistics pertain to currency, deposit, and other monetary liabilities of central banks and other depository corporations; to credit extended by these corporations; and to their external positions and transactions.

Among the major macroeconomic statistical systems, money and banking statistics play a special role. This is for a number of reasons:

(i) In a market economy based on money, the financial system provides intermediation for the resources flowing among the economic sectors. Because the monetary sector serves as a clearinghouse for financial flows, the monetary accounts provide unique insight into the behavior of these flows, which mirror the flows of real resources among the sectors,

(ii) Monetary accounts focus on variables that play a central role in the macroeconomic analysis of an open economy – money, credit, as well as foreign assets and liabilities. The monetary accounting framework is flexible, and therefor useful for analyses based on several alternative theories of how money, prices and balance of payments are developed, and

(iii) Monetary accounts are generally available with little delay. Even in economies where reliable economic data can be scarce, monetary accounts are among the most reliable, and are therefor useful to policymakers in need of monitoring economic developments.

The major objectives of monetary and financial policy are related to price stability and inflation, growth and employment, the balance of payments, government and private sector borrowing, the efficiency of financial markets, macroeconomic concerns and systemic stability. In order to identify policy instruments, intermediate policy targets, and their relationship to the objectives, timely and reliable statistics are necessary.

Money and Banking Statistics consists of the financial balance sheets of the financial sector, other sectors are included in the sense that they are the bearers of assets on and liabilities to the financial sector. Flows and other changes in assets and liabilities are not part of the Money and Banking Statistics as represented in the IMF’s International Financial Statistics (IFS).

Although the total financial sector is covered, major emphasis is placed on the consolidated balance sheet of the monetary authorities and the deposit money banks - the monetary survey. This because the monetary survey is the most essential part utilized in assessing the impact of monetary and credit developments in the economy.

The presentation of Money and Banking Statistics in the IFS derives its basic analytic form from three general considerations. First, important similarities in the forms of financial institutions, financial instruments and data presentations have developed among countries, and these warrant some degree of standardization in the presentation of data on an international basis. Second, the variations in data availability among countries require that analytical judgements are made at the minimum level of standardization of basic data that is feasible in order to facilitate international comparisons of monetary developments. Third, the special concerns of the International Monetary Fund not only require that international comparisons are made, but also suggest some of the analytical uses that can be made of Money and Banking statistics.

The following section is based on A guide to Money and Banking Statistics in International Financial Statistics – which is a description of the statistics presented in the IMF’s International Financial Statistics rather than a compilation guide for national statisticians.