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Global Liquidity through the Lens of Monetary Aggregates

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Listed:
  • Kyuil Chung
  • Jong-Eun Lee
  • Elena Loukoianova
  • Hail Park
  • Hyun S 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.

Suggested Citation

  • Kyuil Chung & Jong-Eun Lee & Elena Loukoianova & Hail Park & Hyun S Shin, 2014. "Global Liquidity through the Lens of Monetary Aggregates," IMF Working Papers 14/9, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:14/9
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    References listed on IDEAS

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    1. McKinnon, Ronald I, 1982. "Currency Substitution and Instability in the World Dollar Standard," American Economic Review, American Economic Association, vol. 72(3), pages 320-333, June.
    2. 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 (US).
    3. Andrew Filardo & James Yetman, 2012. "The expansion of central bank balance sheets in emerging Asia: what are the risks?," BIS Quarterly Review, Bank for International Settlements, June.
    4. 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.
    5. Masazumi Hattori & Hyun Song Shin & Wataru Takahashi, 2009. "A Financial System Perspective on Japan's Experience in the Late 1980s," IMES Discussion Paper Series 09-E-19, Institute for Monetary and Economic Studies, Bank of Japan.
    6. 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.
    7. 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, August.
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