Global Liquidity, Risk Premiums and Growth Opportunities

By Gianni De Nicolo, Iryna V. Ivaschenko

March 1, 2009

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Format: Chicago

Gianni De Nicolo, and Iryna V. Ivaschenko Global Liquidity, Risk Premiums and Growth Opportunities, (USA: International Monetary Fund, 2009) accessed December 25, 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

This paper constructs new indicators of liquidity for equity, bond and money markets in major advanced and emerging market countries, documents their evolution and comovements, and assesses the extent to which such measures are determinants of selected spreads and proxy measures of countries' growth opportunities. Three main results obtain. First, there is evidence of an historical increase in market liquidity since the early 1990s, in part as a result of advances in international financial integration, but markets have been increasingly exposed to global systemic liquidity shocks. Second, liquidity indicators appear to be important determinants of bond spreads in advanced economies and EMBI spreads in emerging markets. Third, improvements in market liquidity have significant real effects, as liquidity indicators have a significant positive impact on proxy measures of countries' growth opportunities.

Subject: Asset and liability management, Financial markets, International liquidity, Liquidity, Liquidity indicators, Liquidity management, Securities markets, Stock markets

Keywords: Bond liquidity indicator, Domestic money market liquidity indicator, Global, Government bond bond market, Government bond liquidity, Growth Opportunities, International liquidity, Liquidity, Liquidity effect, Liquidity indicator, Liquidity management, Liquidity of market, Liquidity premium, Liquidity shock, Market linkage, Market liquidity, Panel B. government bond bond market, Risk Premiums, Securities markets, Stock markets, WP

Publication Details

Pages:

35
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2009/052
Stock No:

WPIEA2009052
ISBN:

9781451872002
ISSN:

1018-5941

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