Trinity College Dublin

Skip to main content.

Top Level TCD Links

Global Funding Liquidity, Equity Returns and Crash Risk: Implications for Monetary Policy

Aidan Corcoran, Institute for International Integration Studies, Trinity College Dublin

Abstract

Monetary policy loosening and the associated impact on credit availability may have played a role in the present financial crisis. If such liquidity risk exists and is undiversifiable, then loose monetary policy should be associated with a risk premium. This paper tests for the existence of such a premium in US and global equity markets, in an asset pricing framework which accounts for endogeneity from equity prices to credit availability.

Classification-JEL: E52, F31, G01, G15
Keywords: Global excess liquidity, monetary policy, foreign exchange.

 


Last updated 28 August 2014 by IIIS (Email).