What is Global Excess Liquidity, and Does it Matter?

The Great Recession: on the Ineffectiveness of Domestic Policies and the Need of Multilateral Arrangements

“…Although lower inflation rates are sometimes attributed to twenty years of inflationtargeting policies, inflation has in fact been falling in the U.S.A for at least thirty years now, and the idea that inflation is the greatest danger faced by an economy began gaining force in the early 1970s with the publications by Robert Lucas and Thomas Sargent, and has prevailed under three successive Federal Reserve chairmen: Paul Volcker (1979-1987), Alan Greenspan (1987-2006 and Ben Bernanke (since 2006). Average annual inflation of consumer prices in the U.S.A fell from 9% in the ten-year period from 1973-1982 to about 3% over the following 25 years .…”

Does G-4 Liquidity Spill Over?

“…Ciccarelli and Mojon (2005) find that global liquidity appears to be an important, if not the most important, determinant of inflationary pressure at a global level. Rüffer and Stracca (2006) provide a comprehensive analysis of the nature and measure of global excess liquidity. They conclude that excess liquidity is a useful indicator of inflationary pressure at a global level as is the level of interest rates.…”

Lessons for Monetary Policy: What Should the Consensus Be?

“…In a world of globalized financial markets, "domestic" money and credit and therefore asset prices (as well as domestic inflation) might be influenced by global developments. This aspect has been studied by a number of papers (e.g., Sousa and Zaghini, 2004;Borio and Filardo, 2007;Rüffer and Stracca, 2007;Alessi and Detken, 2009;Ciccarelli and Mojon, 2010). This leads to the question of what a central bank can achieve acting alone and what would then be the consequence for the exchange rate.…”