Only total dollar amounts, summed across all maturities, are reported for the following categories: small-denomination time deposits at commercial banks and thrift institutions; large-denomination time deposits; total Eurodollar deposits; total repurchase agreements; bankers acceptances; short-term Treasury securities; and commercial paper.(18) This bundling of assets with different maturities into monetary asset sub-indexes causes difficulty.
The perfect substitutes condition would imply that, unless all user costs applying to the sub-index are equal, economic agents will hold only the least-expensive sub-component of each monetary sub-index - an implication that is usually rejected when it can be tested.(25) In our MSI database, we use the Jevons formula to create user cost sub-indexes for small-denomination time deposits at commercial banks and thrift institutions, large-denomination time deposits, total Eurodollar deposits, bankers acceptances, and commercial paper.
Financial institutions have moved especially to curb acceptance of high-interest, large-denomination time deposits
. Given the banks' greater reluctance to lend, the diffusion index of bank-loan availability has improved much less in relation to the fall in the short-term prime rate than past experience would have indicated.(12) Operationally, this would appear to reflect more severe non-price credit restrictions or more stringent collateral policies.
M2 contracted further in October while M3 expanded at a moderate pace, buoyed by continued rapid growth in large-denomination time deposits
. For the year through October, M2 grew at a rate at the bottom of the Committee's range for 1994 and M3 at a rate in the lower half of its range for the year.
M2 and M3 changed little in May and appear to have contracted in June; both retail and large-denomination time deposits
continued to run off rapidly.