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Measuring financial market liquidity

Author

Listed:
  • Kerry, Will

    (Deputy Division Chief of the Monetary and Capital Markets Department, International Monetary Fund, USA)

Abstract

This paper introduces a new composite indicator of market liquidity, based on a series of measures developed in the academic literature. The indicator suggests that financial market liquidity was markedly lower in the summer of 2007, following a period of high liquidity. The indicator shows that market liquidity can fall rapidly in times of stress, highlighting the importance of managing this source of risk in the financial system. The views expressed in this paper are those of the author and not necessarily those of the Bank of England.

Suggested Citation

  • Kerry, Will, 2008. "Measuring financial market liquidity," Journal of Risk Management in Financial Institutions, Henry Stewart Publications, vol. 1(2), pages 181-190, March.
    • Handle: RePEc:aza:rmfi00:y:2008:v:1:i:2:p:181-190
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    Citations

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    Cited by:

    1. Gianfranco Gianfelice & Giuseppe Marotta & Costanza Torricelli, 2015. "A liquidity risk index as a regulatory tool for systemically important banks? An empirical assessment across two financial crises," Applied Economics, Taylor & Francis Journals, vol. 47(2), pages 129-147, January.
    2. Gianfranco Gianfelice & Giuseppe Marotta & Costanza Torricelli, 2015. "A liquidity risk index as a regulatory tool for systemically important banks? An empirical assessment across two financial crises," Applied Economics, Taylor & Francis Journals, vol. 47(2), pages 129-147, January.

    More about this item

    Keywords

    liquidity; liquidity risk; liquidity premium; bid-ask spreads; risk management;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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