Understanding global liquidity

Sandra Eickmeier, Leonardo Gambacorta and Boris Hofmann

No 03/2013, Discussion Papers from Deutsche Bundesbank

Abstract: We explore the concept of global liquidity based on a factor model estimated using a large set of financial and macroeconomic variables from 24 advanced and emerging market economies. We measure global liquidity conditions based on the common global factors in the dynamics of liquidity indicators. By imposing theoretically motivated sign restrictions on factor loadings, we achieve a structural identification of the factors. The results suggest that global liquidity conditions are largely driven by three common factors and can therefore not be summarised by a single indicator. These three factors can be identified as global monetary policy, global credit supply and global credit demand.

Keywords: global liquidity; monetary policy; credit supply; credit demand; international business cycles; factor model; sign restrictions (search for similar items in EconPapers)
JEL-codes: C3 E44 E5 F3 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-ban, nep-ifn, nep-mac and nep-mon
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Citations: View citations in EconPapers (19)

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Related works:
Journal Article: Understanding global liquidity (2014)
Working Paper: Understanding Global Liquidity (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdps:032013

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