Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/226700
Authors: 
Herwartz, Helmut
Ochsner, Christian
Rohloff, Hannes
Year of Publication: 
2020
Series/Report no.: 
cege Discussion Papers No. 409
Abstract: 
We conceptualize global liquidity as global monetary policy and credit components by means of a large-scale dynamic factor model in the spirit of Eickmeier,Gambacorta, and Hofmann (2014). Going beyond previous work, we decompose aggregate credit components into credit supply and demand flows directed at the public (governments) and private sector (businesses and households). We show that this decomposition enhances the understanding of global liquidity considerably. Whereas global public sector credit supply is best understood as a safe-haven lending factor from an investors perspective, lenders supply the private sector with credit to maximize profits along the business cycle. Moreover, the public 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.
Subjects: 
global liquidity
credit composition
financial cycle
dynamic factor model
JEL: 
C32
C38
E32
E44
E51
Document Type: 
Working Paper

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