Optimal Liquidity and Economic Stability / Linghui Han, Il Lee.

Format:

Book

Government document

Author/Creator:

Han, Linghui.

International Monetary Fund. Asia and Pacific Department.

Contributor:

Lee, Il.

Series:

IMF Working Papers; Working Paper ; No. 2012/135

IMF Working Papers

Language:

English

Subjects (All):

Liquidity (Economics).

Monetary policy.

International finance.

Physical Description:

1 online resource (24 p.)

Edition:

1st ed.

Place of Publication:

Washington, D.C. : International Monetary Fund, 2012.

Language Note:

English

Summary:

Monetary aggregates are now much less used as policy instruments as identifying the right measure has become difficult and interest rate transmission has worked well in an increasingly complex financial system. In this process, little attention was paid to the potential spillover of excess liquidity. This paper suggests a notional level of "optimal" liquidity beyond which asset prices will start to rise faster than the GDP deflator, thereby creating a gap between the face value and the real purchasing value of financial assets and widen the wedge in income between those with capital stock and those living on salaries. Such divergence will eventually lead to an abrupt and disorderly adjustment of the asset value, with repercussions on the real sector.

Contents:

Cover; Contents; I. Introduction; II. Defining Liquidity and Optimality; III. Testing for Causality between Liquidity and Prices; IV. Relationship between liquidity and consumption; V. Summary and Conclusion; References; Annexes; A. Sources of Data and Estimation Results; B. Relationship Liquidity and Demand

Notes:

"Asia and Pacific Department."

"May 2012."

Includes bibliographical references.

Description based on print version record.

ISBN:

9781475509687

1475509685

9781475537895

1475537891

OCLC:

794602571