Understanding Global Liquidity
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Understanding Global Liquidity

BIS Working Papers No 402

Sandra Eickmeier, Leonardo Gambacorta and Boris Hofmann
BIS, 2013
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Editorial Rating

7

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  • 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.

Summary

As globalization and deregulation have led to ever-growing cross-border financial activity, so do financial conditions and crises now transcend national frontiers. Many analyses of the 2008 financial crisis and its aftermath focus on “global liquidity,” an indeterminate notion, as a significant factor in these interconnected financial patterns and events.

To get to the root of what constitutes global liquidity, researchers sought a “commonality” among data from 24 nations from the period 1995 to 2011. Typically, liquidity is “the availability...

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.

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