Download or read book Global Liquidity Transmission to Emerging Market Economies, and Their Policy Responses written by Woon Gyu Choi and published by International Monetary Fund. This book was released on 2017-10-30 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper distills and identifies global liquidity (GL) momenta from the macro-financial data of advanced economies through a factor model with sign restrictions as policy-driven, market-driven, and risk averseness factors. Using a panel factor-augmented VAR, we investigate responses of emerging market economies (EMEs) to GL shocks. A policy-driven liquidity increase boosts growth in EMEs, elevating stock prices and currency values, while a risk averseness rise has an opposite effect. A market-driven GL expansion boosts stock markets and lowers funding costs, promoting competitiveness and current account. Inflation targeting EMEs fare better than EMEs under alternative regimes with respect to macrofinancial volatility.