Global liquidity expansion boosts asset prices and risks financial stability worldwide.
The article explores whether global liquidity from major economies affects asset prices in other countries. The researchers found that when G-4 countries increase liquidity, it leads to higher asset prices in receiving economies. This suggests that global liquidity influences asset prices. Additionally, the study shows that liquidity is linked to increased official reserves and equity portfolio inflows in receiving countries. The connection between excess equity returns, credit growth, and global liquidity also raises concerns about financial stability in these economies.