Staff Reports
The Shifting Drivers of Global Liquidity
June 2017 Number 819
Revised August 2019
JEL classification: F34, G10, G21

Authors: Stefan Avdjiev, Leonardo Gambacorta, Linda S. Goldberg, and Stefano Schiaffi

The sensitivity of the main global liquidity components—international loan and bond flows—to global factors varied considerably over the past decade. The estimated sensitivity to U.S. monetary policy rose substantially in the immediate aftermath of the global financial crisis, peaked around the time of the 2013 Fed “taper tantrum,” and then reverted toward pre-crisis levels. Conversely, the responsiveness of international bank lending to global risk conditions declined steadily throughout the post-crisis period. We show that the main driver of the fluctuations in the estimated sensitivities to U.S. monetary policy was the degree of convergence among advanced economy monetary policies. Meanwhile, the post-crisis fall in the sensitivity of international bank lending to global risk was mainly driven by increases in the lending shares of better capitalized banking systems.

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