IDEAS home Printed from https://ideas.repec.org/p/laf/wpaper/cr1203.html
   My bibliography  Save this paper

Global excess liquidity and asset prices in emerging countries: a pvar approach

Author

Listed:
  • Sophie Brana

    ()

  • Marie-Louise Djigbenou

    ()

  • Stéphanie Prat

    () (Larefi, Université Bordeaux IV)

Abstract

The overly accommodating monetary policy is often accused of creating surplus liquidity and bubbles on the asset markets. In particular, it could have contributed to strong capital inflows in emerging countries, which may have had a significant impact on financial stability in these countries, affecting domestic financing conditions and creating a risk of upward pressures on asset prices. We focus in this paper on the impact of global excess liquidity on good and asset prices for a set of emerging market countries by estimating a panel VAR model. We define first global liquidity and highlight situations of excess liquidity. We then find that excess liquidity at the global level has spillover effects on output and price level in emerging countries. The impact on real estate and commodity prices in emerging countries is less clear.

Suggested Citation

  • Sophie Brana & Marie-Louise Djigbenou & Stéphanie Prat, 2012. "Global excess liquidity and asset prices in emerging countries: a pvar approach," Larefi Working Papers 1203, Larefi, Université Bordeaux 4.
  • Handle: RePEc:laf:wpaper:cr1203
    as

    Download full text from publisher

    File URL: http://lare-efi.u-bordeaux4.fr/IMG/pdf/CR12-03.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    2. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
    3. Chudik, Alexander & Fratzscher, Marcel, 2010. "Identifying the Global Transmission of the 2007-09 Financial Crisis in a GVAR Model," CEPR Discussion Papers 8093, C.E.P.R. Discussion Papers.
    4. Rüffer, Rasmus & Stracca, Livio, 2006. "What is global excess liquidity, and does it matter?," Working Paper Series 696, European Central Bank.
    5. Belke, Ansgar & Orth, Walter & Setzer, Ralph, 2010. "Liquidity and the dynamic pattern of asset price adjustment: A global view," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1933-1945, August.
    6. Love, Inessa & Zicchino, Lea, 2006. "Financial development and dynamic investment behavior: Evidence from panel VAR," The Quarterly Review of Economics and Finance, Elsevier, vol. 46(2), pages 190-210, May.
    7. Joao Sousa & Andrea Zaghini, 2008. "Monetary policy shocks in the euro area and global liquidity spillovers," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 13(3), pages 205-218.
    8. Chudik, Alexander & Fratzscher, Marcel, 2011. "Identifying the global transmission of the 2007-2009 financial crisis in a GVAR model," European Economic Review, Elsevier, vol. 55(3), pages 325-339, April.
    9. Gouteron, S. & Szpiro, D., 2005. "Excès de liquidité monétaire et prix des actifs," Working papers 131, Banque de France.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Vespignani, Joaquin L. & Ratti, Ronald A., 2013. "International monetary transmission to the Euro area: Evidence from the U.S., Japan and China," MPRA Paper 49153, University Library of Munich, Germany.
    2. Ratti, Ronald A. & Vespignani, Joaquin L., 2013. "Crude oil prices and liquidity, the BRIC and G3 countries," Energy Economics, Elsevier, vol. 39(C), pages 28-38.
    3. Hoffmann, Andreas & Löffler, Axel, 2014. "Low interest rate policy and the use of reserve requirements in emerging markets," The Quarterly Review of Economics and Finance, Elsevier, vol. 54(3), pages 307-314.
    4. Lagoarde-Segot, Thomas & Leoni, Patrick L., 2013. "Pandemics of the poor and banking stability," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4574-4583.
    5. Ratti, Ronald A. & Vespignani, Joaquin L., 2015. "Commodity prices and BRIC and G3 liquidity: A SFAVEC approach," Journal of Banking & Finance, Elsevier, vol. 53(C), pages 18-33.
    6. repec:eee:enepol:v:106:y:2017:i:c:p:111-121 is not listed on IDEAS
    7. Ponomarenko, Alexey, 2013. "Early warning indicators of asset price boom/bust cycles in emerging markets," Emerging Markets Review, Elsevier, vol. 15(C), pages 92-106.
    8. Tng Boon Hwa & Mala Raghavan & Teh Tian Huey, 2017. "Macroeconomic surveillance of portfolio flows and its real effects: Malaysia's experience," IFC Bulletins chapters,in: Bank for International Settlements (ed.), Statistical implications of the new financial landscape, volume 43 Bank for International Settlements.
    9. Brana, Sophie & Prat, Stéphanie, 2016. "The effects of global excess liquidity on emerging stock market returns: Evidence from a panel threshold model," Economic Modelling, Elsevier, vol. 52(PA), pages 26-34.
    10. Ratti, Ronald A. & Vespignani, Joaquin L., 2013. "Liquidity and crude oil prices: China's influence over 1996–2011," Economic Modelling, Elsevier, vol. 33(C), pages 517-525.
    11. Beckmann, Joscha & Belke, Ansgar & Czudaj, Robert, 2014. "Does global liquidity drive commodity prices?," Journal of Banking & Finance, Elsevier, vol. 48(C), pages 224-234.
    12. Shawkat Hammoudeh & Duc Khuong Nguyen & Ricardo M. Sousa, 2014. "China’s Monetary Policy and Commodity Prices," Working Papers 2014-298, Department of Research, Ipag Business School.
    13. Marie-Louise Djigbenou, 2014. "Determinants of Global Liquidity Dynamics:a FAVAR approach," Working Papers hal-00956314, HAL.
    14. Ratti, Ronald & Vespignani, Joaquin, 2012. "Liquidity and crude oil prices: China’s influence over 1996-2011," Working Papers 15062, University of Tasmania, Tasmanian School of Business and Economics, revised 20 Sep 2012.
    15. Tng Boon Hwa & Mala Raghavan & Teh Tian Huey, 2017. "Macro-financial effects of portfolio flows: Malaysia’s experience," CAMA Working Papers 2017-35, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    16. Hammoudeh, Shawkat & Nguyen, Duc Khuong & Sousa, Ricardo M., 2015. "US monetary policy and sectoral commodity prices," Journal of International Money and Finance, Elsevier, vol. 57(C), pages 61-85.
    17. repec:eee:reveco:v:49:y:2017:i:c:p:548-567 is not listed on IDEAS
    18. Shawkat Hammoudeh & Duc Khuong Nguyen & Ricardo M. Sousa, 2014. "US Monetary Policy and Commodity Sector Prices," Working Papers 2014-438, Department of Research, Ipag Business School.
    19. Nady Rapelanoro, 2017. "Hoarding international reserves and global liquidity expansion, what are the links and do they matter?," EconomiX Working Papers 2017-13, University of Paris Nanterre, EconomiX.
    20. repec:erh:journl:v:10:y:2018:i:1:p:1-13 is not listed on IDEAS
    21. Nady Rapelanoro, 2016. "Spillover effects of global liquiditys expansion on emerging countries: evidences from a Panel VAR approach," EconomiX Working Papers 2016-17, University of Paris Nanterre, EconomiX.
    22. Hoffmann, Andreas & Loeffler, Axel, 2013. "Low interest rate policy and the use of reserve requirements in emerging markets," Working Papers 120, University of Leipzig, Faculty of Economics and Management Science.
    23. Bilge Bakin & Gozde Gurgun, 2014. "Portfolio Investments and Asset Prices Relationship in Turkey," Proceedings of International Academic Conferences 0201138, International Institute of Social and Economic Sciences.

    More about this item

    Keywords

    Global liquidity; excess liquidity indicators; crises indicators; emerging countries; financial crisis;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F3 - International Economics - - International Finance
    • G01 - Financial Economics - - General - - - Financial Crises

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:laf:wpaper:cr1203. 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: (Cyril Mesmer). General contact details of provider: http://edirc.repec.org/data/labrdfr.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.