 Does G-4 Liquidity Spill Over?L. Psalida and Tao Sun No 2011/237, IMF Working Papers from International Monetary Fund Abstract: The resumption of strong capital flows into emerging markets in mid-2009 brought back the debate over whether pull or push factors are the main determinants. This paper, using panel specifications with alternative measures of global liquidity, asks the question whether G-4 liquidity expansion spills over to the rest of the world. The paper finds strong positive links between G-4 liquidity expansion and asset prices, such as equities, in the liquidity receiving economies, which indicates that the push factor plays an important role in asset prices. Liquidity also has a strong positive link with the accumulation of official reserves and with equity portfolio inflows in receiving economies. Moreover, the association between excess equity returns, excess credit growth, and global liquidity has implications for rising risks to financial stability in the receiving economies. Keywords: WP; break; money supply; liquidity growth; liquidity expansion; capital flows; asset valuations; exchange rates; global liquidity; Granger causality test; liquidity condition; liquidity-receiving economy; liquidity-easing measure; International liquidity; Monetary base; Liquidity; Domestic liquidity; Excess liquidity; Global; Middle East; Western Hemisphere (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2011/237 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC. |
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