Exploring the Dynamics of Global Liquidity

48 Pages Posted: 1 Nov 2012

See all articles by Sally Chen

Sally Chen

International Monetary Fund (IMF)

Philip Liu

International Monetary Fund (IMF)

Andrea Michaela Maechler

International Monetary Fund (IMF)

Chris Marsh

affiliation not provided to SSRN

Sergejs Saksonovs

International Monetary Fund (IMF)

Hyun Song Shin

Bank for International Settlements (BIS)

Date Written: October 2012

Abstract

This paper explores the concept of global liquidity, its measurement and macro-financial importance. We construct two sets of indicators for global liquidity: a quantity series distinguishing between core and noncore liabilities of financial intermediatires and a corresponding price series. Using price and quantity indicators simultaneously, it is possible to distinguish between shocks to the supply and demand for global liquidity, and isolate their impact on the economy. Our results confirm that global liquidity conditions matter for economic and financial stability, and points to indicators whose regular monitoring could be valuable to policymakers. 

Keywords: Liquidity, Demand, Supply, Monetary aggregates, International monetary system, Liquidity, core and noncore financial liabilities, shadow banking, growth

JEL Classification: C23, G01, G15, G18, G32

Suggested Citation

Chen, Sally and Liu, Philip and Maechler, Andrea Michaela and Marsh, Chris and Saksonovs, Sergejs and Shin, Hyun Song, Exploring the Dynamics of Global Liquidity (October 2012). IMF Working Paper No. 12/246. Available at SSRN: https://ssrn.com/abstract=2169785

Sally Chen (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Philip Liu

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Andrea Michaela Maechler

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Chris Marsh

affiliation not provided to SSRN ( email )

Sergejs Saksonovs

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Hyun Song Shin

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

HOME PAGE: http://www.bis.org/author/hyun_song_shin.htm

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