Exploring the Dynamics of Global Liquidity
IMF Working Papers, October 11, 2012
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- Exploring the Dynamics of Global Liquidity
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Bibliographic details
- Authors: Sally Chen, Philip Liu, Andrea M. Maechler, Chris Marsh, Sergejs Saksonovs, Hyun S Shin
- Published: October 11, 2012
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475512793.001
Summary & Objectives
- Explores the concept of global liquidity, its measurement and macro-financial importance.
- Constructs two sets of indicators for global liquidity:
- a quantity series distinguishing between core and noncore liabilities of financial intermediaries
- a corresponding price series
- Uses price and quantity indicators simultaneously to distinguish between shocks to the supply and demand for global liquidity and to isolate their impact on the economy.
Measurement and Methodology
- Two complementary indicator sets:
- Quantity indicators: distinguish between core and noncore liabilities of financial intermediaries.
- Price indicators: a corresponding price series aligned with the quantity indicators.
- Joint use of price and quantity indicators permits:
- identification of supply shocks to global liquidity
- identification of demand shocks to global liquidity
- isolation of the impacts of these shocks on economic and financial outcomes
Key Findings
- Confirms that global liquidity conditions matter for economic and financial stability.
- Highlights indicators whose regular monitoring could be valuable to policymakers.
- Emphasizes the distinction between core and noncore financial liabilities in assessing global liquidity dynamics.
Policy Implications and Recommendations
- Regular monitoring of the constructed price and quantity indicators is valuable for policymakers to detect and differentiate supply and demand shocks to global liquidity.
- Monitoring should pay particular attention to:
- core liquidity measures
- noncore liquidity quantity aggregates
- price-index movements that, when combined with quantity indicators, reveal supply versus demand dynamics
Contextual Notes, Subjects, and Keywords
- Subjects listed: 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 include: 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
Source: Exploring the Dynamics of Global Liquidity, IMF Working Paper (October 11, 2012).