The Role of Global Liquidity in Global Yield Dynamics

Euihwhan Park, Dong Heon Kim

Research output: Contribution to journalArticlepeer-review

Abstract

With the emergence of global liquidity as an important factor in the global financial market since the global financial crisis in 2008, the global financial market has shown interest in the effect of global liquidity on global yield dynamics. This paper examines the role of global liquidity in global yield dynamics based on the macro-finance model. Estimation results show that the global liquidity plays a more important role in explaining the global level factor than global inflation, but such macro factors do not seem to explain the global slope factor. We interpret that global liquidity not only has information on global commodity inflation but also on global asset price inflation and future expected inflation and thus has more explanatory power than global inflation.

Original languageEnglish
Pages (from-to)193-220
Number of pages28
JournalSeoul Journal of Economics
Volume36
Issue number2
DOIs
Publication statusPublished - 2023

Bibliographical note

Funding Information:
Euihwhan Park, Assistant Professor, Department of Economics, Hannam University, DaeJeon. (E-mail): eh_park@hnu.kr Dong Heon Kim, Corresponding Author, Professor, Department of Economics, Korea University, Seoul. (Tel): +82-2-3290-2226. (E-mail): dongkim@korea.ac.kr Acknowledgement: Part of this paper is based on Euihwan Park’s Ph.D. dissertation (2019) at Korea University. We thank Taiyo Yoshimi and the participants in the 2022 Japanese Society of International Economics Conference for their constructive comments and suggestions. Dong Heon Kim also thanks the Korea University research grant.

Funding Information:
Part of this paper is based on Euihwan Park’s Ph.D. dissertation (2019) at Korea University. We thank Taiyo Yoshimi and the participants in the 2022 Japanese Society of International Economics Conference for their constructive comments and suggestions. Dong Heon Kim also thanks the Korea University research grant.

Publisher Copyright:
© (2023), All Rights Reserved.

Keywords

  • Dynamic factor model
  • Global liquidity
  • Global yield
  • Term structure
  • Yield curve

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

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