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Financial integration, global liquidity and global macroeconomic linkages

Author

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  • Ansgar Belke
  • Jonas Keil

Abstract

Purpose - – The purpose of this paper is to analyse the effect of financial integration on several macroeconomic variables from a global perspective. Design/methodology/approach - – The authors apply a cointegrated vector autoregression model using quarterly data for 1980-2009. Analysing the interactions of globally aggregated measures capturing cross-border financial transactions, monetary liquidity, output, consumer and commodity prices, the authors focus on the dissection of short-run and long-run dynamics. Findings - – The authors find that increasing financial integration has a positive impact driving GDP. The authors also find evidence of two-way causality between commodity prices and financial flows. The results suggest that commodity prices are driven by financial integration and the gap between the dynamics of commodity prices and financial flows is closed by global liquidity injected by central banks. Originality/value - – The paper contributes to the empirical literature by analysing the overall impact of global financial integration and of global liquidity on global macroeconomic variables in a unified framework.

Suggested Citation

  • Ansgar Belke & Jonas Keil, 2016. "Financial integration, global liquidity and global macroeconomic linkages," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 43(1), pages 16-26, January.
    • Handle: RePEc:eme:jespps:v:43:y:2016:i:1:p:16-26
    DOI: 10.1108/JES-02-2015-0026
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    Citations

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    Cited by:

    1. Ayesha Liaqat & Mian Sajid Nazir & Iftikhar Ahmad & Hammad Hassan Mirza & Farooq Anwar, 2020. "Do stock price bubbles correlate between China and Pakistan? An inquiry of pre‐ and post‐Chinese investment in Pakistani capital market under China‐Pakistan Economic Corridor regime," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 25(3), pages 323-335, July.
    2. Israr Ahmad Shah Hashmi & Arshad Ali Bhatti, 2019. "On the monetary measures of global liquidity," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 5(1), pages 1-23, December.

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