Global liquidity transmission to emerging market economies, and their policy responses
Woon Gyu Choi,
Geun-Young Kim and
Journal of International Economics, 2017, vol. 109, issue C, 153-166
This paper analyzes the transmission of global liquidity (GL) from advanced economies (AEs) to emerging market economies (EMEs). We distill GL momenta from the macro-financial data of AEs through a factor model and identify them with sign restrictions as policy-driven, market-driven, and risk averseness factors. Using a panel factor-augmented VAR analysis, we then investigate EME responses to shocks to GL momenta. A positive shock to policy-driven liquidity boosts growth in EMEs, elevating stock prices and currency values, while a shock to risk averseness has a largely opposite effect. A market-driven GL expansion boosts stock markets and lowers funding costs, increasing competitiveness and current account balance. Inflation targeting EMEs are found to fare better than EMEs under alternative regimes in terms of macro-financial volatility.
Keywords: Global liquidity; Emerging market economies; Panel factor-augmented VAR; Inflation targeting (search for similar items in EconPapers)
JEL-codes: F32 F42 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
Working Paper: Global Liquidity Transmission to Emerging Market Economies, and Their Policy Responses (2017)
Working Paper: Global Liquidity Transmission to Emerging Market Economies, and Their Policy Responses (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:109:y:2017:i:c:p:153-166
Access Statistics for this article
Journal of International Economics is currently edited by Gourinchas, Pierre-Olivier and RodrÃguez-Clare, AndrÃ©s
More articles in Journal of International Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().