Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/177832
Authors: 
Hossfeld, Oliver
Pramor, Marcus
Year of Publication: 
2018
Series/Report no.: 
Bundesbank Discussion Paper 05/2018
Abstract: 
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.
Subjects: 
global liquidity
emerging markets
exchange market pressure
search for yield
global financial cycle
JEL: 
F31
E51
E58
C23
ISBN: 
978-3-95729-433-3
Document Type: 
Working Paper
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