2014-2024 | Monthly | Bank Negara Malaysia
The statistics show the historical rate of change of M1 and M2 in Malaysia's banking system.
- M1 and M2 are measurements of the money supply.
- M1 includes coins and notes in circulation plus demand deposits (current accounts)in banks.
- M2 includes M1 plus narrow Quasi-money (Savings deposits + Fixed Deposits + NIID + Repos + Foreign Currency Deposits)
When the YoY changes for M1 are faster than M2, it is usually known as the golden cross. When YoY changes for M1 cross above M2, it means funds are flowing from the banking system into the market. A golden cross happens when corporations and households are willing to spend more, which will spur the economy.
When M1 increases, it typically indicates an expansionary monetary policy by the central bank. This can lead to increased liquidity in the financial system, potentially stimulating economic activity through higher consumer spending and business investment. However, it also raises the risk of inflation if the increased money supply outpaces the growth of real output.
On the other hand, changes in M2 reflect broader trends in financial markets and savings behaviour. An increase in M2 may indicate higher levels of savings and investment, which can support long-term economic growth. However, if M2 grows too rapidly, it could signal excessive risk-taking or asset bubbles in financial markets, posing risks to financial stability.
