Understanding global liquidity

Sandra Eickmeier, Leonardo Gambacorta and Boris Hofmann

European Economic Review, 2014, vol. 68, issue C, 1-18

Abstract: We explore the concept of global liquidity based on a factor model estimated using a large set of financial and macroeconomic variables from 24 advanced and emerging market economies. We measure global liquidity conditions based on the common global factors in the dynamics of liquidity indicators. By imposing theoretically motivated sign restrictions on factor loadings, we achieve a structural identification of the factors. The results suggest that global liquidity conditions are largely driven by three common factors and can therefore not be summarised by a single indicator. These three factors can be identified as global monetary policy, global credit supply and global credit demand.

Keywords: Global liquidity; Monetary policy; International business cycles; Factor model; Sign restrictions (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (63)

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Related works:
Working Paper: Understanding Global Liquidity (2013)
Working Paper: Understanding global liquidity (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:68:y:2014:i:c:p:1-18

DOI: 10.1016/j.euroecorev.2014.01.015

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