IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Global liquidity as an early warning indicator of asset price booms: G5 versus broader measures

  • Beata Bierut
Registered author(s):

    We test the performance of various measures of global liquidity as early warning indicators of booms in house and equity prices in 20 OECD countries between 1970 and 2010. We use a panel probit approach to test the relative performance of global liquidity measures based on two aggregation schemes: the traditional measures, based on G5 data, and broader measures, based on data for up to 26 countries/currency areas. Our results show that, in the last decade, global liquidity measures outperformed domestic measures as early warning indicators. Between the two global liquidity measures, G5 aggregates often outperformed broader global liquidity measures. The search for the best early warning indicator showed that the G5 real narrow money gap performed best for booms in house prices, while the global real private credit growth gap performed best for booms in equity prices, either when aggregated over G5 or over a broader sample of countries. Nevertheless, given the rising importance of the emerging market economies and a declining share of G5 in global liquidity, the current superior performance of G5 measures may not warrant their superior performance in the future. Therefore, given the importance of global liquidity measures in warning about asset price booms, the need for constructing broader global liquidity measures is warranted.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.dnb.nl/en/binaries/Working%20Paper%20377_tcm47-291373.pdf
    Download Restriction: no

    Paper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 377.

    as
    in new window

    Length:
    Date of creation: May 2013
    Date of revision:
    Handle: RePEc:dnb:dnbwpp:377
    Contact details of provider: Postal: Postbus 98, 1000 AB Amsterdam
    Web page: http://www.dnb.nl/en/

    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Reinhart, Carmen & Kaminsky, Graciela, 1999. "The twin crises: The causes of banking and balance of payments problems," MPRA Paper 14081, University Library of Munich, Germany.
    2. Rüffer, Rasmus & Stracca, Livio, 2006. "What is global excess liquidity, and does it matter?," Working Paper Series 0696, European Central Bank.
    3. AfDB AfDB, 2008. "List of Working Paper Series (1 - 95)," Working Paper Series 356, African Development Bank.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:dnb:dnbwpp:377. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rob Vet)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.