International liquidity

International liquidity
See also
Classification of financial markets Deposit rate Creation of money Home market International Monetary Fund Bond Bank Foreign exchange reserves Trading Book Fully funded

International Liquidity is associated with international payments. These payments result from the international trade in goods and services, as well as from the flow of capital between one country and another.International liquidity refers to the accepted rules official measures regulating the imbalance in international payments. Another variant of international liquidity aggregates either wide measures of the money supply or credit. If the interest rates are low and lenders ris appetite has been increased, the loan may seems easy to get, so liquidity is sometimes used as a synonym for loan.

Governments and central banks, such as commercial banks and non-financial corporations, wanted more "liquidity assurance" - that is to say they would have adequate international liquidity to protect themself against the financial crisis.

International liquidity assurence

Satisfactory techniques to ensure international liquidity assurance should meet the following criteria:

• They should provide reasonable assurance on the fulfillment of their international liquidity needs in those countries that need it
• They should shun overmuch moral hazard, in particular miss giving countries basic imbalance to the means to delay the necessary adjustment
• They must avoid unreasonable load for liquidity providers

The diverse sense of International liquidity

In the national economic context, liquidity has many meanings:

• Market liquidity: the ease with which you can sell an asset, in particular, whether it can be done in a large volume without lowering the price.
• Institutional liquidity: the institution is liquid if its balance sheet has a high share of assets whose value can be quickly realized to pay off debts.
• Cash liquidity: originally liquidity defined as base money - construction block and the loan multiplier policiy instrument. Used as a general reflection of the policy and monetary position. Including loose meaning. it could be a price, interest rate of quality, one of monetary aggregates or credit.

Two areas of International liquidity

In richer countries, immersion in global capital markets has created international liquidity is in two main areas of vulnerability:

• the assistance of financial institutions
• the funding of supreme debt

Both are closely related as support for private financial system can increase public debt, while fiscal strained the government may have difficulty in credibly guaranteeing financial stability.

References

• Biancareli A. M. (2008), International liquidity cycles to developing countries in the financial globalization era, State University of Campinas, Brasil
• Grenville S. (2007), Perspectives: International Liquidity, Lowy Institute for international policy, Sydney, Australia
• Grenville S. (2007), [https://archive.lowyinstitute.org/sites/default/files/pubfiles/Grenville%2C_Loose_use_of_liquidity_1.pdf Loose use of liquidity just confuses the issue, Australian financial review, Australia
• Moessner R., Allen W. (2013), International Liquidity management since the financial crisis, Cass Business School and Bank for International Settlements
• Obstfeld M. (2011), International Liquidity: THe Fiscal Dimension, National Bureau of Economic Research, Cambridge, MA02138

Author: Wojciech Ślusarczyk