M4 is a monetary aggregate that considers M3 plus notes, bonds and treasury bills. This means that it includes a large mass of money made up of assets that can be transformed into liquidity in periods of more than one year.


Over time, the criteria for calculating the different monetary aggregates have been modified. For example, in the case of Banco de México (Banxico), in 1999 the M3 aggregate included the non-resident sector with their respective deposits and holdings of government securities. As of 2018, this magnitude is recorded in the M4 aggregate.

We must remember that M3 incorporates, in addition to M2, repo, participations of funds in the money market, term deposits, term repurchase agreements, and debt instruments such as private and public bonds (treasury bills), but with a maturity of up to two years.

In turn, we must point out that M2 corresponds to M1 plus demand accounts, short-term deposits, savings books and daily repurchase agreements.

M1 is the monetary aggregate that comprises all the cash available in the hands of the public to carry out transactions, both liquid money and demand deposits of financial institutions and bank reserves in the central bank of the respective country.

It can then be concluded that M4, also known as liquid assets in the hands of the public, includes not only money with short-term liquidity, but also those long-term instruments that are issued by private entities or the Government. It is also referred to as liquid assets in the hands of the public.

Specifically, the M4 considers all those magnitudes of the M3 and the set of all the resources deposited in banking and financial debt instruments issued in the country owned by non-residents.

It is also worth remembering that a monetary aggregate is a quantification of the concept of money, incorporating those elements that are used as a means of payment in the economy. For its measurement, the liabilities of financial institutions are observed.

Instruments added by the M4

The instruments that the M4 adds would basically be:

  • Treasury bills: These are debt securities issued by the Government. The maturity is usually up to eighteen months. At the end of this period, the holder receives again the invested capital plus a fixed interest. It is a fixed income instrument.
  • Promissory notes: It is a document that represents a promise to pay. This, for a specified sum and within an agreed period. It is a credit title that establishes a formal commitment.
  • Bonds: They are debt instruments. The issuer receives a payment from the buyer, in exchange for remuneration in the future, either periodically or in a single payment at maturity. This, based on an interest rate that can be fixed or variable. Bonds can be issued in the short or long term (in the case of M4, the latter are added, compared to M3).

M4 formula

The M4 aggregate is calculated as follows:

M4 = M + B + T + TD + DB + DP2 + D3M + FMM + CTA + TDPP + BON + LT + PG


  • M: Coins.
  • B: Tickets.
  • T: Transfers.
  • TD: Use of debit cards.
  • DB: Direct debit.
  • DP2: Deposits with a term of less than two years.
  • D3M: Deposits that can be redeemed by giving 3 months’ notice.
  • FMM: Money Market Funds.
  • CTA: Temporary assignments of assets.
  • TDPP: Private or public debt securities with a maturity of less than two years.
  • BON: Bonds.
  • LT: Treasury bills.
  • PG: Promissory notes.

In conclusion, the monetary aggregate of liquid assets in the hands of the public (ALP) represents the amount of liquid assets that are in circulation.