 Does Global Liquidity Matter for Monetary Policy in the Euro Area?Helge Berger and Thomas Harjes No 2009/017, IMF Working Papers from International Monetary Fund Abstract: Global excess liquidity is sometimes believed to limit sovereign monetary policy even in large economies, including the euro area. There is much discussion about what constitutes global excess liquidity and our approach adjusts liquidity for longer-term interest rate and output effects. We find that especially excess liquidity in the U.S. leads developments in euro area liquidity. U.S. excess liquidity also enters consistently positive as a determinant of euro area inflation. There is some evidence that this result may be related to a weakening of the effectiveness of monetary policy in the euro area during times of excessive U.S. liquidity. Keywords: WP; interest rate; area inflation; Global excess liquidity; euro area; inflation; monetary policy; interest rate channel; forecasting accuracy; excess liquidity; liquidity condition; liquidity development; liquidity arbitrage; JP liquidity; EA liquidity; Excess liquidity; International liquidity; Liquidity; Liquidity management; Global (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:2009/017 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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