Monetary Policy During Liquidity Dry-Ups

42 Pages Posted: 22 Aug 2017 Last revised: 23 Aug 2017

Stefan Fiesel

Karlsruhe Institute of Technology

Marliese Uhrig-Homburg

Karlsruhe Institute of Technology (KIT) - Institute for Finance

Maxim Ulrich

Karlsruhe Institute of Technology

Date Written: December 9, 2016

Abstract

We provide new international evidence for a monetary policy liquidity transmission channel in the United States, United Kingdom, and the Eurozone. The central banks of these countries are, with a different degree, able to soften the economic downward spiral after an unexpected arrival of a financial market illiquidity shock. In order to uncover this transmission channel, we rely on a nonlinear and international economic set-up to distinguish between times of liquidity crisis and non-crisis and to account for common (global) and country specific (local) shocks. We also fnd that out of these central banks, the Federal Reserve has an especially influential transmission channel with strong and beneficial spillover effects to the United Kingdom and the Eurozone economy.

Keywords: liquidity, global shocks, multi-country, monetary policy

JEL Classification: G01, G10, G15, E44, E52

Suggested Citation

Fiesel, Stefan and Uhrig-Homburg, Marliese and Ulrich, Maxim, Monetary Policy During Liquidity Dry-Ups (December 9, 2016). Available at SSRN: https://ssrn.com/abstract=3020910 or http://dx.doi.org/10.2139/ssrn.3020910

Stefan Fiesel

Karlsruhe Institute of Technology ( email )

Kaiserstraße 12
Karlsruhe, Baden Württemberg 76131
Germany

Marliese Uhrig-Homburg

Karlsruhe Institute of Technology (KIT) - Institute for Finance ( email )

P.O. Box 6980
D-76049 Karlsruhe, DE
Germany
+49 721 6084 8183 (Phone)
+49 721 6084 8190 (Fax)

HOME PAGE: http://derivate.fbv.kit.edu/english/index.php

Maxim Ulrich (Contact Author)

Karlsruhe Institute of Technology ( email )

Bluecherstrasse 17
Karlsruhe, Baden Württemberg 76131
Germany
+4972160844270 (Phone)

HOME PAGE: http://risk.fbv.kit.edu/c-ram

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