Global Liquidity and Asset Prices: Measurement, Implications, and Spillovers

December 1, 1999

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Format: Chicago

Klaas Baks, and Charles Frederick Kramer. Global Liquidity and Asset Prices: Measurement, Implications, and Spillovers, (USA: International Monetary Fund, 1999) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Much recent commentary suggests that global liquidity has influenced financial conditions in the major international markets to an important degree, and that excess liquidity in one financial center can influence financial conditions elsewhere. Little formal research has addressed these issues, however. In this paper, we use 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. Evidence suggests that an increase in G-7 liquidity is consistent with a decline in G-7 real interest rates and an increase in G-7 real stock returns. There is also evidence of liquidity spillovers across countries.

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

Publication Details

Pages:

33
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1999/168
Stock No:

WPIEA1681999
ISBN:

9781451858242
ISSN:

1018-5941

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