Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/316542 
Year of Publication: 
2018
Citation: 
[Journal:] East Asian Economic Review (EAER) [ISSN:] 2508-1667 [Volume:] 22 [Issue:] 3 [Year:] 2018 [Pages:] 307-336
Publisher: 
Korea Institute for International Economic Policy (KIEP), Sejong-si
Abstract: 
This paper proposes a monetary aggregate "Liquidity" that could serve as a useful indicator for gauging the appropriateness of monetary policy. If liquidity rises above a certain threshold, it is signaling that monetary policy is losing traction due to structural and other impediments even when the inflation gap remains open. This indicator supplements the financial cycle approach but adds value by providing a benchmark that is derived from the national account, and not based on its own trend. Over the last two decades, each time this measure rose above the threshold range, it was followed by a decline in GDP growth. The latter was greater when accompanied by a high physical asset value to GDP, e.g., an elevated property market.
Subjects: 
Liquidity
Monetary Policy
Inflation Targeting
Financial Stability
Credit to GDP Gap
JEL: 
E31
E32
E52
G01
Persistent Identifier of the first edition: 
Creative Commons License: 
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Document Type: 
Article

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