Global Funding Liquidity, Equity Returns and Crash Risk: Implications for Monetary Policy
AbstractMonetary policy loosening and the associated impact on credit availability may have played a role in the present financial crisis. If such liquidity risk exists and is undiversifiable, then loose monetary policy should be associated with a risk premium. This paper tests for the existence of such a premium in US and global equity markets, in an asset pricing framework which accounts for endogeneity from equity prices to credit availability.
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Bibliographic InfoPaper provided by IIIS in its series The Institute for International Integration Studies Discussion Paper Series with number iiisdp318.
Length: 29 pages
Date of creation: Feb 2010
Date of revision: Feb 2010
Global excess liquidity; monetary policy; foreign exchange.;
Find related papers by JEL classification:
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- F31 - International Economics - - International Finance - - - Foreign Exchange
- G01 - Financial Economics - - General - - - Financial Crises
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
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