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Global Liquidity through the Lens of Monetary Aggregates

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  • Kyuil Chung
  • Jong-Eun Lee
  • Elena Loukoianova
  • Hail Park
  • Hyun Song Shin

Abstract

This paper examines how the financial activities of non-financial corporates (NFCs) in international markets potentially affects domestic monetary aggregates and financial conditions. Monetary aggregates reflect, in part, the activities of NFCs, who channel capital market financing into the domestic banking system, thereby influencing funding conditions and credit availability. Periods of capital inflows are also those when the domestic currency is appreciating, and such periods of rapid exchange rate appreciation coincide with increases in the central bank’s foreign exchange reserves, increasing the stock of narrow money. The paper examines economic significance of cross-country panel data on monetary aggregates and other measures of non-core bank liabilities. Non-core liabilities that reflect the activities of NFCs reflect broad credit conditions and predict global trade and growth.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 14/9.

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Length: 49
Date of creation: 24 Jan 2014
Date of revision:
Handle: RePEc:imf:imfwpa:14/9

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Related research

Keywords: Monetary aggregates; Corporate sector; International capital markets; Capital inflows; Liquidity; Exchange rate appreciation; Banking sector; capital flows; debt securities; global capital markets; open capital markets; index options; hedging; securities markets; international capital flows; corporate bonds; capital market financing; corporate bond market; hoarding; subsidiaries; border capital flows; net capital; real effective exchange rate;

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  1. Claudio E. V. Borio & Philip Lowe, 2004. "Securing sustainable price stability: should credit come back from the wilderness?," BIS Working Papers 157, Bank for International Settlements.
  2. McKinnon, Ronald I, 1982. "Currency Substitution and Instability in the World Dollar Standard," American Economic Review, American Economic Association, vol. 72(3), pages 320-33, June.
  3. Joon‐Ho Hahm & Hyun Song Shin & Kwanho Shin, 2013. "Noncore Bank Liabilities and Financial Vulnerability," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45, pages 3-36, 08.
  4. Rochelle M. Edge & Ralf R. Meisenzahl, 2011. "The unreliability of credit-to-GDP ratio gaps in real-time: Implications for countercyclical capital buffers," Finance and Economics Discussion Series 2011-37, Board of Governors of the Federal Reserve System (U.S.).
  5. Rochelle M. Edge & Ralf R. Meisenzahl, 2011. "The Unreliability of Credit-to-GDP Ratio Gaps in Real Time: Implications for Countercyclical Capital Buffers," International Journal of Central Banking, International Journal of Central Banking, vol. 7(4), pages 261-298, December.
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