Global Liquidity and Asset Prices: Measurement, Implications, and Spillovers
IMF Working Papers, December 1, 1999
Source details
- Canonical URL
- Global Liquidity and Asset Prices: Measurement, Implications, and Spillovers
Other formats
Bibliographic details
- Authors: Klaas Baks, Charles Frederick Kramer
- Published: December 1, 1999
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451858242.001
Overview and Research Question
- Paper examines whether global liquidity has influenced financial conditions in major international markets and whether excess liquidity in one financial center can influence financial conditions elsewhere.
- Uses three indexes of liquidity (money growth) in the Group of Seven industrial countries to explore the international dimension of the relationship between liquidity and asset returns.
Methodology
- Constructs and employs three liquidity (money growth) indexes for G-7 countries.
- Empirical analysis links changes in G-7 liquidity indexes to asset price outcomes (real interest rates and real stock returns).
- Series and exact index construction details are presented in the working paper (33 pages).
Key Findings
- An increase in G-7 liquidity is consistent with a decline in G-7 real interest rates.
- An increase in G-7 liquidity is consistent with an increase in G-7 real stock returns.
- Evidence of liquidity spillovers across countries: liquidity conditions in one financial center can influence financial conditions elsewhere.
Subject Areas and Keywords
- Subject: Asset prices, Financial institutions, Financial services, Monetary base, Money, Prices, Real interest rates, Short-term interest rates, Stocks
- Keywords: asset, asset prices, Divisia index, GDP weight, Global, international spillovers, Liquidity, Monetary base, money growth, narrow money growth, real asset, Real interest rates, rest of the world, Short term interest rates, stock return, Stocks, U.S. dollar, WP
Content in this bundle
- Global Liquidity and Asset Prices: Measurement, Implications, and Spillovers - WP/99/168