Global Liquidity Transmission to Emerging Market Economies, and Their Policy Responses

Woon Gyu Choi, Taesu Kang, Geun-Young Kim () and Byongju Lee ()
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Geun-Young Kim: International Economics Team, Economic Research Institute, The Bank of Korea
Byongju Lee: International Economics Team, Economic Research Institute, The Bank of Korea

No 2014-38, Working Papers from Economic Research Institute, Bank of Korea

Abstract: This paper analyzes the transmission of global liquidity from advanced economies to EMEs. We distill global liquidity (GL) momenta from the macro-financial data of advanced economies through a factor model. Using a panel factor-augmented VAR analysis, we then delve into EMEs' responses to shocks to each of three types of global liquidity momenta-policy-driven liquidity, market-driven liquidity, and risk averseness. Each GL shock significantly affects EMEs on the real and external fronts. Counterfactual analyses suggest that policy rates are effective in stabilizing the real front, whereas appropriate adjustments in foreign reserves could be conducive to stabilizing the external front.

Keywords: Global liquidity; Policy responses; Panel Factor-Augmented VAR (search for similar items in EconPapers)
JEL-codes: F32 F42 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2014-12-31
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Citations: View citations in EconPapers (4)

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http://papers.bok.or.kr/RePEc_attach/wpaper/english/wp-2014-38.pdf Working Paper, 2014 (application/pdf)

Related works:
Journal Article: 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 (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:bok:wpaper:1438

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