Global Liquidity through the Lens of Monetary Aggregates
IMF Working Papers, January 24, 2014
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Bibliographic details
- Authors: Kyuil Chung, Jong-Kun Lee, Elena Loukoianova, Hail Park, Hyun S Shin
- Published: January 24, 2014
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475514551.001
Summary and central findings
- The paper examines how the financial activities of non-financial corporates (NFCs) in international markets potentially affects domestic monetary aggregates and financial conditions.
- Monetary aggregates reflect, in part, the activities of NFCs, who channel capital market financing into the domestic banking system, thereby influencing funding conditions and credit availability.
- Periods of capital inflows coincide with domestic currency appreciation; such periods of rapid exchange rate appreciation coincide with increases in the central bank’s foreign exchange reserves, increasing the stock of narrow money.
- Non-core bank liabilities that reflect the activities of NFCs capture broad credit conditions and predict global trade and growth.
Data, scope, and methods
- The analysis uses cross-country panel data on monetary aggregates and other measures of non-core bank liabilities.
- Focus of subject matter: Asset and liability management; Balance of payments; Capital inflows; Commercial banks; Currencies; Financial institutions; International liquidity; Monetary aggregates; Money.
Policy implications and interpretations highlighted
- Monitoring monetary aggregates and non-core bank liabilities can provide a lens on how NFCs’ international financing affects domestic funding conditions and credit availability.
- Changes in narrow money linked to central bank foreign exchange reserve accumulation should be considered when assessing the domestic impact of capital inflows and exchange rate appreciation.
- Measures of non-core liabilities that capture NFC-related activities can serve as indicators for broader credit conditions and as predictors for global trade and growth.
This content unit summarizes the IMF Working Paper "Global Liquidity through the Lens of Monetary Aggregates".