Global liquidity and exchange market pressure in emerging market economies

Arbeitspapier

We analyse the relationship between global liquidity and exchange market pressure in 32 emerging market economies. Exchange market pressure is a measure of excess currency demand that is applicable across different exchange rate regimes as it accounts for changes in exchange rates, foreign exchange reserves and, optionally, interest rates. Surges in monetary liquidity, credit provision, and short-term funding in advanced economies are shown to be robustly associated with appreciation pressure on emerging market currencies. The underlying transmission mechanism, however, only operates under regular financial market conditions: ample liquidity provision in advanced economies contributes to the build-up of financial stability risks in emerging market economies in tranquil times, but further liquidity injections do not avert the pronounced depreciation pressure on emerging market currencies in times of high market volatility.

Object Details

• ISBN: 978-3-95729-433-3
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Bundesbank Discussion Paper ; No. 05/2018

Classification and Topics

• Classification: Wirtschaft ; Foreign Exchange ; Money Supply; Credit; Money Multipliers ; Central Banks and Their Policies ; Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models
• Subject: global liquidity ; emerging markets ; exchange market pressure ; search for yield ; global financial cycle

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Hossfeld, Oliver ; Pramor, Marcus
• Event: Veröffentlichung
• (who): Deutsche Bundesbank
• (where): Frankfurt a. M.
• (when): 2018

Further information

• Handle: http://hdl.handle.net/10419/177832
• Last update: 10.03.2025, 11:42 AM CET