Global Funding Liquidity, Equity Returns and Crash Risk: Implications for Monetary Policy

Aidan Corcoran

The Institute for International Integration Studies Discussion Paper Series from IIIS

Abstract: Monetary policy loosening and the associated impact on credit availability may have played a role in the present financial crisis. If such liquidity risk exists and is undiversifiable, then loose monetary policy should be associated with a risk premium. This paper tests for the existence of such a premium in US and global equity markets, in an asset pricing framework which accounts for endogeneity from equity prices to credit availability.

Keywords: Global excess liquidity; monetary policy; foreign exchange. (search for similar items in EconPapers)
JEL-codes: E52 F31 G01 G15 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2010-02, Revised 2010-02
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Persistent link: https://EconPapers.repec.org/RePEc:iis:dispap:iiisdp318

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