Measuring Liquidity in Financial Markets

December 1, 2002

Preview Citation

Format: Chicago

Tonny Lybek, and Abdourahmane Sarr. Measuring Liquidity in Financial Markets, (USA: International Monetary Fund, 2002) accessed September 18, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper provides an overview of indicators that can be used to illustrate and analyze liquidity developments in financial markets. The measures include bid-ask spreads, turnover ratios, and price impact measures. They gauge different aspects of market liquidity, namely tightness (costs), immediacy, depth, breadth, and resiliency. These measures are applied in selected foreign exchange, money, and capital markets to illustrate their operational usefulness. A number of measures must be considered because there is no single theoretically correct and universally accepted measure to determine a market's degree of liquidity and because market-specific factors and peculiarities must be considered.

Subject: Asset prices, Currency markets, Liquidity, Liquidity indicators, Securities markets

Keywords: Exchange rate, Market liquidity, Money market, Price change, WP

Publication Details

Pages:

63
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2002/232
Stock No:

WPIEA2322002
ISBN:

9781451875577
ISSN:

1018-5941

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