Functions, Forms,

and Aggregates of
Money

Definition and Functions of Money

Definition by François Perroux Money is described as an instrument of payment that is intermediate, general, immediate, and indeter…

Money allows for the measurement of various goods and services, simplifying the valuation
by reducing multiple evaluations to a single monetary assessment.
process
Unit of Account
It introduces a standard unit of account to minimize the complexity of price relation…

Money serves as an instrument of payment that is general, immediate, and indeter…

Search costs: The double coincidence of wants

Medium of Exchange among trading parties.

Functions of Money
It alleviates the drawbacks of barter systems, Waiting costs: Expenses related to
which include: immobilization and storage of
goods.
Transportation costs: Direct and indirect costs
associated with exchanging goods.

Although designed for circulation, money can be saved or hoard…

Store of Value
It acts as a means to defer purchasing power to the future, incorporating an intertemporal…

Forms of Money

Consumables Examples include sugar, salt, wheat, textiles, and…

Commodity Money
Non-consumables An example is the "Couri," which refers to shells used as mon…

Types of Metallic Money Coins made of metal whose nominal value corresponds to the value of the metal…

Weighed Money: Requires weighing metals in the presence of an expert due to varying forms
aspects.
and

Metallic Money Forms of Metallic Money Counted Money: Metals are minted into standardized coins for ease of pay…

Struck Money: The process of minting coins involves creating impressions on both sides of the coin
mints.
in

Free Minting: Minting was accessible to metal own…

Minting Types
Legal Minting: Minting became a royal preroga…

Banknotes serve as certificates of deposit for precious metals held in banks or specialized institu…
Banknotes and Certificates
Merchants could retrieve their deposits after paying a "storage…
Paper Money
These are receipts similar to gold certificates, representing government…
State-issued Notes
They are paper money issued by the state backed by claims against…

Components of Fiduciary Money Comprises divisionary money (metal coins) and banknotes (paper mon…

Fiduciary Money Divisionary Money Includes coins of various denominations (e.g., 1, 2, 5, 10…

Banknotes Paper money in denominations of 20, 50, 100, and 200…

Scriptural money refers to money recorded in accounts rather than physically circulat…
Definition and Characteristics
According to M. Ansiaux, it moves from account to account rather than hand to…

Scriptural Money Types of Scriptural Money Includes deposits at commercial banks, the central bank, and postal ser…

Facilitates transactions without physical move…

Advantages of Scriptural Money Provides greater security against loss or the…

Generates accounting records that serve as proof in dis…

Cheques A written order directing a bank to pay a specified amount to a third party.

Pre-printed and Non-endorsable: Cannot be made out to bearer or cashed at the bank's…
Types of Cheques
Instruments of Scriptural Mon… Non-printed and Endorsable: Retain all normal cheque characteris…

Bank Transfers: Written orders to debit one account and credit anoth…

Other Instrumen… Direct Debit Notices: Allow automatic payments to credi…

Bank Cards: Enable withdrawals from ATMs or bank coun…

Measuring Money

Importance of Measuring Mon… Accurate quantification of money in circulation is essential to avoid infla…

Demand-Pull Inflation: Occurs when money supply growth outpaces GDP…

Types of Inflation
Cost-Push Inflation: Results from rising prices of input…

Economic: National products become less competi…

Economic and Social Costs of Inflation
Social: Decreased purchasing power and increased unemploy…

Monetary Aggregates in Morocco

Reliability: Data must be accurate and precise.

Availability: Quick access to data for timely monetary policy adjustmen…

Qualities of Monetary Aggregates
Representativeness: Aggregates should reflect the overall spending capacity of non-financial…

Cohesion: Grouping of monetary assets into homogeneous sub…

Monetary Availability: Immediate payment means (MF and MS), sight deposits in banks, treasury, and postal…
Pre-1997 Measurement Instru…
Quasi-money: Term deposits in…

M1: Fiduciary Money + Scriptural Mon…

Post-1997 Measurement Instru… M2: M1 + Savings accounts and deposit accounts.

M3: M2 + Term accounts, fixed-term bonds, and negotiable certificates of de…

PL1: Treasury bonds, negotiable treasury bills, and financing company…

Liquid Placement Aggregates PL2: Collective investment schemes in securi…

PL3: Diversified and equity collective investment…

Financing the Economy and Monetary Creation

Financing can be sourced from savings or monetary re…

Modes of Financing
Savings can be utilized through self-financing or borrow…

Financial Market: Long-term loan market mobilizing national savings via secu…
Capital Market Financing
Money Market: Short- to medium-term capital market with various seg…

Direct Finance
Interbank Market: Allows banks to balance their treasury posi…

Components of the Money Market Negotiable Debt Instruments: Facilitates exchanges of specific debt securi…

Refinancing with BAM: Banks can obtain funds from BAM through various pension agree…

Vary in capital nature and status (private, semi-public, public, off…

Commercial Banks
Functions include receiving public funds, distributing credit, and providing payment…

Unlike banks, they do not accept deposits for short-term peri…

Financing Companies
Focus on credit operations related to specific sectors like consumer goods and real…

The financial system in Morocco is overseen by the Ministry of Finance and…

Regulatory Institu… Ministry of Finance Monitors banking activities and regulates credit institu…

BAM Directly influences the money market and guides monetary…

National Credit and Savings Council (CNCE): Consulted on monetary policy and credit orienta…

Consultation and Representation Bod… Credit Institutions Committee (CEC): Advises the Minister of Finance on credit institution activ…

Disciplinary Commission for Credit Institutions (CDEC): Handles disciplinary cases against credit institu…

Monetary Creation (Money Supply)

General Principles of Monetary Creation Banks create money by issuing credit to economic agents and purchasing issued secu…

Monetary Destruction The opposite of monetary creation, occurring through credit repayments and asset…

Bank Money Creation Various cases of bank money creation are discussed in the…

Mechanisms of Monetary Cre… Central Bank Money Creation Different scenarios of central bank money creation are also cov…

The treasury acts as the state's cashier, creating scriptural money when paying…
Treasury Money Creation
It also creates money indirectly to finance budget deficits through advances from BAM or
public
issuingsecurities.

External Monetary Creation Counter… Net Foreign Assets: Measures the impact of external transactions on monetary…

Monetary Counterparts
Claims on the State: Represents the portion of budget deficits not financed by…
Internal Monetary Creation Counter…
Claims on the Economy: Encompasses all credits extended to businesses and house…

Demand for Money Banks create money in response to the demand from non-financial…

Limits of Monetary Creation Banks' Cash Needs Banks must procure necessary amounts from the central bank to create scriptural…

Central Bank Control The central bank can influence money creation by adjusting liquidity and interest…

Cash Withdrawals The conversion of scriptural money into cash affects bank liquid…

Currency Needs Importers' demand for foreign currency can strain bank liquid…
Factors Affecting Bank Liquidity
Treasury Circuit Withdrawals A portion of created scriptural money may be deposited in the treasury…

Reserve Requiremen… BAM mandates banks to hold a percentage of their demand liabilities as reserves, impacting…

Classical and monetarist views suggest that money supply is exogenous, while Keyne-
Credit Multiplier Theory perspectives
sian argue it is endogenous.
Credit Multiplier and Divisor
Credit Multiplier Presentation K = 1 / (b + r - rb), where b is the currency held by the public, and r is the reserve requirement…