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Understanding Global Liquidity
Report

Understanding Global Liquidity

BIS Working Papers No 402

BIS, 2013

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Editorial Rating

7

Qualities

  • Innovative

Recommendation

Econometric analysis forms the main body of this crisp, efficient academic paper about “global liquidity.” Economists Sandra Eickmeier, Leonardo Gambacorta and Boris Hofmann contend that three main factors contribute to global liquidity: “global monetary policy, global credit supply” and “global credit demand.” They identify patterns in the interrelationships among them over time, particularly in the run-up to and the aftermath of the 2008 crisis. Though not radical, their conclusions show how data-managing econometric techniques can support economic conclusions. getAbstract recommends their clear insights as aids in exploring the largely uncharted subject of global liquidity.

Take-Aways

  • The wax and wane of “global liquidity” indicators are helpful in analyzing the causes of the 2008 recession and its fragile recovery.
  • Three factors drive global liquidity: “global monetary policy, global credit supply” and “global credit demand.”
  • Loose credit supply was the primary factor in the boom before the bust in 2008.

About the Authors

Sandra Eickmeier is an economist at the Deutsche Bundesbank. Leonardo Gambacorta and Boris Hofmann are economists at the Bank for International Settlements.