Nonlinear dynamics in Divisia monetary aggregates:an application of recurrence quantification analysis

We construct recurrence plots(RPs)and conduct recurrence quantification analysis(RQA)to investigate the dynamic properties of the new Center for Financial Stability(CFS)Divisia monetary aggregates for the United States.In this study,we use the lat-est vintage of Divisia aggregates,maintained within CFS.We use monthly data,from January 1967 to December 2020,which is a sample period that includes the extreme economic events of the 2007–2009 global financial crisis.We then make comparisons between narrow and broad Divisia money measures and find evidence of a nonlinear but reserved possible chaotic explanation of their origin.The application of RPs to broad Divisia monetary aggregates encompasses an additional drift structure around the global financial crisis in 2008.Applying the moving window RQA to the growth rates of narrow and broad Divisia monetary aggregates,we identify periods of changes in data-generating processes and associate such changes to monetary policy regimes and financial innovations that occurred during those times.

Missing Dollars： Significant Statistical Omissions of Global Monetary Aggregates

The choice of liquidity indicators is a key issue in global liquidity management. Money supply statistics such as M2 are no longer able to reflect the true scale of global liquidity due to the effect of financial globalization. External bank liabilities, as an important indicator to measure global liquidity conditions, are omitted by many countries in their broad money statistics. Given that financial institutions＇ external liabilities serve as a major source of fiscal shock as well as an important cause for the accumulation of monetary risk, it is imperative to include these external liabilities into the global liquidity indicator system.

On the monetary measures of global liquidity

This study constructs and examines the dynamics of theoretical and atheoretical measures of global liquidity,using monthly data on the components of broad money over the period 2001 M12-2017 M12 for 39 high income countries.We group the countries into five regional blocks as categorized by the World Bank:East Asia and the Pacific,Europe and Central Asia,Latin America and the Caribbean,Middle East and North Africa,and North America.The atheoretical measures exploited by this study comprise of the simple-sum,GDP-weighted growth rates and PCA based aggregation methods;whereas theoretical measures include the currency equivalent and Divisia index techniques of monetary aggregation.We employ a graphical approach to investigate the trends and dynamics of the aggregates overtime,and a cross-correlation between cyclical components of global real economic activity and the lag of cyclical components of the measures of global liquidity to gauge the strength of their associations.The findings of this study reveal that theoretical measures outperform atheoretical ones in effective delineation of financial and liquidity conditions,and policy stance.Their cyclical components are also strongly associated with those of global real business activity.The currency equivalent measure,besides being a leading indicator of the shift in policy stance,has a sturdy association with global real business activity.Moreover,the theoretical measures,as noted by some empirical studies,contain some information content that the atheoretical lack.

On Some Short Comings of the Transmission of Monetary Policy in the Euro Area

The great expansionary policies undertaken by the main central banks of the world since the outbreak of the world financial and economic crisis in 2008 did not produce a satisfying recovery of the real economy especially in Europe. In order to identify the causes of this failure, it became necessary to deepen the analysis of the transmission mechanism of monetary policy, and to investigate if there are some obstacles hampering the functioning of this mechanism. The scope of the present papers to analyze some short comings of the transmission mechanism of the monetary policy is conducted by the European Central Bank （ECB） in the euro area. After a close examination of the relationship between the monetary base and the supply of money, transmission through the credit channel and through the interestrate channel will be taken into consideration. The analysis shows that loans to nonfinancial corporations were not affected by the huge amount of liquidity created by the ECB, while a very slow growth is shown by loans to private households during the whole period.