IMF Working Papers

Exploring the Dynamics of Global Liquidity

BySally Chen, Philip Liu, Andrea M. Maechler, Chris Marsh, Sergejs Saksonovs, Hyun S Shin

October 11, 2012

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Sally Chen, Philip Liu, Andrea M. Maechler, Chris Marsh, Sergejs Saksonovs, and Hyun S Shin. "Exploring the Dynamics of Global Liquidity", IMF Working Papers 2012, 246 (2012), accessed 12/5/2025, https://doi.org/10.5089/9781475512793.001

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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 explores the concept of global liquidity, its measurement and macro-financial importance. We construct two sets of indicators for global liquidity: a quantity series distinguishing between core and noncore liabilities of financial intermediatires and a corresponding price series. Using price and quantity indicators simultaneously, it is possible to distinguish between shocks to the supply and demand for global liquidity, and isolate their impact on the economy. Our results confirm that global liquidity conditions matter for economic and financial stability, and points to indicators whose regular monitoring could be valuable to policymakers. 

Subject: Asset and liability management, Economic theory, Financial crises, Financial statements, Global financial crisis of 2008-2009, International liquidity, Liquidity, Public financial management (PFM), Supply shocks

Keywords: core and noncore financial liabilities, core liquidity, core liquidity supply shock post crisis t-1, demand and supply, demand and supply shock, demand shock post crisis t-1, Financial statements, Global, Global financial crisis of 2008-2009, growth, International liquidity, Liquidity, liquidity creation, liquidity demand shock post crisis t-1, liquidity shock, Noncore liquidity quantity aggregate, post crisis, price index, quantity aggregate, real GDP, shadow banking, supply and demand demand shock, Supply shocks, WP

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