Does G-4 Liquidity Spill Over?

Psalida, L.; Sun, Tao

doi:10.5089/9781463922559.001

Cited by 7 publications

(3 citation statements)

References 17 publications

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“…This phenomenon further explains the positive relationship between high interest rate and capital inflows. To explain the relationship between high interest rate and capital inflows, Psalida and Sun () indicate that in mid‐2009, gradual shift in global portfolio allocation towards emerging markets, triggered by liquidity spillover from developed economies, has led to portfolio inflows that for a number of these countries are large in relation to the absorptive capacity of their domestic markets. This liquidity spillover occurred as a number of developed economies adopted expansionary monetary policy to respond to the 2007 global financial crisis.…”

Section: Theory and Literature Reviewmentioning

confidence: 99%

Volatility Spillovers between the Equity Market and Foreign Exchange Market in South Africa in the 1995‐2010 Period

Bonga‐Bonga

Hoveni

2013

South African J Economics

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This paper attempts to assess the extent of volatility spillovers between the equity market and the foreign exchange market in South Africa. Multistep family of the General Autoregressive Conditional Heteroskedasticity models are used for this end, whereby volatility shocks obtained from the mean equation estimation in each market are included in the conditional volatility of the other market, respectively. The paper selects the appropriate volatility models for each market following criteria such as covariance stationarity, persistence in variance and leverage effects. The finding of the paper indicates that there is a unidirectional relationship in terms of volatility spillovers from the equity market to the foreign exchange market. The paper supports the view that the extent of foreign participation in the South African equity market possibly contributes to this phenomenon.

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Section: Theory and Literature Reviewmentioning

confidence: 99%

Volatility Spillovers between the Equity Market and Foreign Exchange Market in South Africa in the 1995‐2010 Period

Bonga‐Bonga

Hoveni

2013

South African J Economics

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“…Previous studies (Brana et al 2012;Belke et al 2010a;Sousa and Zaghini 2007) showed that global liquidity positively influenced short-term output. Psalida and Sun (2011) also observed positive effects on the credit gap, indicating the role of credit channels in the transmission of global liquidity impacts. Meanwhile, Matsumoto (2011) found that the rising levels of global risk aversion, as measured by the CBOE volatility index (VOX index), have a negative effect on output in various developed and emerging countries.…”

Section: Theoretical Backgroundmentioning

confidence: 85%

The Influence of Global Financial Liquidity on the Indonesian Economy: Dynamic Analysis with Threshold VAR

Ekananda

Suryanto

2021

Economies

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Empirical studies of the global liquidity spillover on Indonesia’s economy are still relatively limited. Most of the global contagion literature on Indonesia’s economy focuses only on the effects of real shock (on output) due to financial shock. We assert that the effect of global output on Indonesia macroeconomic conditions is a fairly relevant issue to be studied. This research aims to investigate the interdependent relationships between world GDP, world commodity prices, world inflation, trade flows, capital inflow, capital account transactions, reserve accumulation, global liquidity (e.g., global broad money), and monetary aggregates, with regard to Indonesia’s GDP variables and inflation. This paper uses threshold vector autoregression (TVAR) to capture regime changes in the variables of the world economy. World economic data and Indonesia’s economic data were utilized to prove different responses to the world economic situation in two different regimes. This research identified two groups of upper regime and lower regime world variables—namely, world inflation, world GDP, and world commodity prices. TVAR estimation resulted in a smaller residual sum of squares compared to VAR estimation. Different regimes resulted in differences in Indonesia’s economic responses due to the shock of world economic variables. The findings generated by this research are expected to be insightful to monetary policymakers in Indonesia.

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“…Ruffer and Stracca (2006) find that a positive shock to global excess liquidity (defined as the ratio between broad money to nominal GDP) leads to a significant rise in domestic real output and price level for the euro area and Japan. Additionally, global liquidity has a significant impact on asset and commodity prices (Darius and Radde, 2010, for global house prices; Thomas, Muhleisen and Pant, 2010, for world oil prices;and Psalida and Tao, 2011, for the impact of G4 liquidity expansion on asset prices in the rest of the world).…”

Section: Literature Reviewmentioning

confidence: 99%