What is Global Excess Liquidity, and Does it Matter?

52 Pages Posted: 6 Dec 2006

See all articles by Rasmus Rueffer

Rasmus Rueffer

European Central Bank (ECB)

Livio Stracca

European Central Bank (ECB)

Date Written: November 2006

Abstract

This paper endeavours to provide a comprehensive analysis of the nature and the possible importance of "global excess liquidity," a concept which has attracted considerable attention in recent years. The contribution of this paper is threefold. First, we present some conceptual discussion on the meaning of excess liquidity in advanced countries with developed financial markets. Second, we report some descriptive analysis on the degree of co-movement of several possible measures of excess liquidity and spill-overs between them for a relatively large sample of industrialised and developing countries. Third, we estimate a VAR model for an aggregate of the major industrialised countries and analyse the transmission of shocks to global excess liquidity to the global economy, including possible cross-border spill-over effects to a number of domestic variables in the world's three largest economies (the US, the euro area and Japan).

Keywords: Global excess liquidity, monetary policy, open economy, international economics

JEL Classification: E52, F42

Suggested Citation

Rueffer, Rasmus and Stracca, Livio, What is Global Excess Liquidity, and Does it Matter? (November 2006). ECB Working Paper No. 696. Available at SSRN: https://ssrn.com/abstract=942737

Rasmus Rueffer (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
+49 69 1344 7087 (Phone)
+49 69 1344 6353 (Fax)

Livio Stracca

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
0049 69 13440 (Phone)
0044 69 1344 6000 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
826
rank
27,654
Abstract Views
3,613
PlumX Metrics