The Effects of Global Liquidity on Global Imbalances

Marie-Louise Djigbenou-Kre () and Hail Park ()
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Marie-Louise Djigbenou-Kre: Banque de France and University Montesquieu Bordeaux IV
Hail Park: Economic Research Institute, The Bank of Korea

No 2015-23, Working Papers from Economic Research Institute, Bank of Korea

Abstract: This paper examines how global liquidity responds to a US (United States) monetary policy shock, and whether global liquidity has effects on global imbalances. To this end we estimate regression and Panel-VARX models using data from the G5 (US, United Kingdom, Euro area, Japan and Canada) and 20 emerging countries. The empirical results show that global liquidity is meaningfully affected by a US monetary shock, and that the effects on global imbalances of global liquidity are significant. The foreign exchange reserves of emerging economies are also found to play a significant role related to global imbalances.

Keywords: Global liquidity; Global imbalances; Panel-VARX; US monetary shock; Spillover effect (search for similar items in EconPapers)
JEL-codes: E51 F30 F33 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2015-09-23
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