Cross‐Country Variation in the Liquidity Effect

The Role of Financial Markets

Bibliographic Data

ID9710571
AuthorsWilliam D Lastrapes (University of Georgia), W Douglas McMillin (Louisiana State University)
Year2004
Volume114
Issue498
Pages890-915
Publication date2004-10-01
Open AccessYes
TypeARTICLE
VenueThe Economic Journal (JOURNAL)
Journal identifiersISSN: 0013-0133 • E-ISSN: 1468-0297
PublisherOxford University Press (OUP) (PUBLISHER)
DOI10.1111/j.1468-0297.2004.00248.x
OpenAlexW2090119925
LanguageEN
References cited36

This paper examines cross-country variation in the liquidity effect - the negative response of interest rates to money supply shocks - focusing on the role of financial factors in explaining this variation. We estimate the liquidity effect for each of 21 countries using VAR models in which money supply shocks are restricted to be neutral in the long-run, then regress the estimated liquidity effect on financial market variables across countries. We find that financial factors play an important role in determining the magnitude of the liquidity effect, and that this evidence is most consistent with generalised versions of limited-participation models. Copyright 2004 Royal Economic Society

Accounting liquidity · Economics · Financial market · Funding liquidity · Liquidity crisis · Liquidity premium · Liquidity risk · Liquidity trap · Market liquidity · Monetary economics · Variation (astronomy · Finance · Fiscal Policies and Political Economy · Global Financial Crisis and Policies · Monetary Policy and Economic Impact

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