The Credit Composition of Global Liquidity

Arbeitspapier

We conceptualize global liquidity as global monetary policy and credit components by means of a large-scale dynamic factor model. Going beyond previous work, we decompose aggregate credit components into credit supply and demand flows directed at businesses, households and governments. We show that this decomposition enhances the understanding of global liquidity considerably. Whereas global government sector credit supply is best understood as a safe-haven lending factor from an investors perspective, lenders supply the businesses and households with credit to maximize profits along the financial cycle. Moreover, the government sector demands credit in times of bust-episodes, whereas private entities demand credit in times of booms. In particular, we find that our global credit estimates explain substantial variance shares of a large panel of international financial aggregates.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: MAGKS Joint Discussion Paper Series in Economics ; No. 15-2021

Classification and Topics

• Classification: Wirtschaft ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Multiple or Simultaneous Equation Models: Classification Methods; Cluster Analysis; Principal Components; Factor Models ; Business Fluctuations; Cycles ; Financial Markets and the Macroeconomy ; Money Supply; Credit; Money Multipliers
• Subject: global liquidity ; credit composition ; financial cycle ; dynamic factor model

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Herwartz, Helmut ; Ochsner, Christian ; Rohloff, Hannes
• Event: Veröffentlichung
• (who): Philipps-University Marburg, School of Business and Economics
• (where): Marburg
• (when): 2021

Further information

• Handle: http://hdl.handle.net/10419/234869
• Last update: 10.03.2025, 11:43 AM CET