Due to Israel joining the Organization for Economic Cooperation and Development
(OECD), the Information and Statistics Department adjusted the definitions and the
calculation of the monetary aggregates in Israel to the international definitions set by
the International Monetary Fund (IMF). The main aggregate for measuring the money
stock—the “broad money” aggregate—includes the most liquid instruments, such as
cash and demand deposits, but also other less liquid instruments, such as short-term
bills (known as makam). The main difference between the broadest monetary aggregate
calculated until now in Israel—M3—and the broad money aggregate derives from the
development in the last few decades of new instruments and issuers, which were not
taken into consideration in the previous definition, such as money market funds (MMFs).
Since the transition to an inflation targeting regime in monetary policy management in
Israel and in many other countries, the monetary aggregates no longer serve a central role in
determining monetary policy. Nevertheless, policy makers examine many indicators when
assessing the policy required to attain the inflation target, among them the development of
the monetary aggregates, as an additional source of information on the state of the economy.