The Shifting Drivers of Global Liquidity

46 Pages Posted: 10 Jul 2017

See all articles by Stefan Avdjiev

Stefan Avdjiev

Bank for International Settlements (BIS)

Leonardo Gambacorta

Bank for International Settlements (BIS); Centre for Economic Policy Research (CEPR)

Linda S. Goldberg

Federal Reserve Bank of New York; National Bureau of Economic Research (NBER)

Stefano Schiaffi

Bank of Italy

Multiple version iconThere are 4 versions of this paper

Date Written: June 2017

Abstract

The sensitivity of the main global liquidity components, international loan and bond flows, to global factors varied considerably over the past decade. The estimated sensitivity to US monetary policy rose substantially in the immediate aftermath of the Global Financial Crisis, peaked around the time of the 2013 Fed “taper tantrum”, and then reverted towards pre-crisis levels. Conversely, the responsiveness of international bank lending to global risk conditions declined steadily throughout the post-crisis period. We show that the main driver of the fluctuations in the estimated sensitivities to US monetary policy was the degree of convergence among advanced economy monetary policies. Meanwhile, the post-crisis fall in the sensitivity of international bank lending to global risk was mainly driven by increases in the lending shares of better-capitalized banking systems.

Suggested Citation

Avdjiev, Stefan and Gambacorta, Leonardo and Goldberg, Linda S. and Schiaffi, Stefano, The Shifting Drivers of Global Liquidity (June 2017). NBER Working Paper No. w23565, Available at SSRN: https://ssrn.com/abstract=2999544

Stefan Avdjiev (Contact Author)

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Leonardo Gambacorta

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Linda S. Goldberg

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-2836 (Phone)
212-720-6831 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Stefano Schiaffi

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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