EconPapers    
Economics at your fingertips  
 

On the monetary measures of global liquidity

Israr Ahmad Shah Hashmi () and Arshad Bhatti
Additional contact information
Israr Ahmad Shah Hashmi: International Islamic University

Financial Innovation, 2019, vol. 5, issue 1, 1-23

Abstract: Abstract This study constructs and examines the dynamics of theoretical and atheoretical measures of global liquidity, using monthly data on the components of broad money over the period 2001 M12-2017 M12 for 39 high income countries. We group the countries into five regional blocks as categorized by the World Bank: East Asia and the Pacific, Europe and Central Asia, Latin America and the Caribbean, Middle East and North Africa, and North America. The atheoretical measures exploited by this study comprise of the simple-sum, GDP-weighted growth rates and PCA based aggregation methods; whereas theoretical measures include the currency equivalent and Divisia index techniques of monetary aggregation. We employ a graphical approach to investigate the trends and dynamics of the aggregates overtime, and a cross-correlation between cyclical components of global real economic activity and the lag of cyclical components of the measures of global liquidity to gauge the strength of their associations. The findings of this study reveal that theoretical measures outperform atheoretical ones in effective delineation of financial and liquidity conditions, and policy stance. Their cyclical components are also strongly associated with those of global real business activity. The currency equivalent measure, besides being a leading indicator of the shift in policy stance, has a sturdy association with global real business activity. Moreover, the theoretical measures, as noted by some empirical studies, contain some information content that the atheoretical lack.

Keywords: Monetary aggregates; Divisia index; Currency equivalent; Simple-sum; GDP-weighted growth rates; PCA (search for similar items in EconPapers)
JEL-codes: E40 E51 E52 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://link.springer.com/10.1186/s40854-019-0134-4 Abstract (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:fininn:v:5:y:2019:i:1:d:10.1186_s40854-019-0134-4

Ordering information: This journal article can be ordered from
http://www.springer. ... nomics/journal/40589

DOI: 10.1186/s40854-019-0134-4

Access Statistics for this article

Financial Innovation is currently edited by J. Leon Zhao and Zongyi

More articles in Financial Innovation from Springer, Southwestern University of Finance and Economics
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

 
Page updated 2021-01-02
Handle: RePEc:spr:fininn:v:5:y:2019:i:1:d:10.1186_s40854-019-0134-4