Knowledge Bank

Background Notes Methodology & Application of the GLI™

Research Notes
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Research Note 1: Principal Components Analysis
Research Note 2 : Granger Causality Tests
Research Note 3 : Citigroup Economic Surprise Indexes
Research Note 4 : The New Transmission Route – Liquidity Drives Investment Term Premia
Research Note 5 : Investor Exposure & Risk Appetite Indexes
Research Note 6 : Implementing Liquidity Index Data Into An Asset Allocation Framework
Research Note 7 : Tactical Asset Allocation (TAA) and Tactical Style Selection (TSS) Using Liquidity Data
Research Note 8 : Money, Credit and Global Liquidity
Research Note 9 : Measuring Liquidity Risk With The Global Risk Index
Research Note 10 : Emerging Market Asset Allocation – Country Fund Allocation
Research Note 11 : Exchange Rates and Liquidity Factors
Research Note 12 : The Federal Reserve and Monetary Transmission

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What others
say about liquidity

…financial crises create and are then perpetuated by illiquidity…concerns about liquidity rapidly become concerns about solvency…the evolution of the financial system away from traditional banking [and] towards a system dominated by a complex network of collateralized lending relationships serves only to increase the primacy of liquidity

US Federal Reserve

…in the run-up to the financial crisis the level of global liquidity was an important determinant of asset price and consumer price dynamics in several economic regions … and… measures of global liquidity are one of the best performing leading indicators of asset price booms and busts.

ECB (2012)

… global monetary liquidity measures … are more informative than real variables in detecting boom and bust cycles.

Alessi and Detken (2011)

…the major thing we look at is liquidity … looking at the great bull markets of this century, the best environment is a very dull, slow economy that the Federal Reserve is trying to get going…

Stanley Druckenmiller
Barron’s Interview

…with respect to crises, the results of our analysis are clear: credit matters, not money … financial crises throughout history can be viewed as ‘credit booms gone wrong’ … [and] past growth of credit emerges as the single best predictor of future financial instability…

Schularick, M and Taylor, A
in Credit Booms Gone Bust, NBER Working Paper

Global liquidity has become a key focus of international policy debates over recent years. This reflects the view that global liquidity and its drivers are of major importance for international financial stability… In a world of high capital mobility, global liquidity cannot be approached as it used to be a few decades ago. It has both an official and a private component…These two concepts both capture one common element, namely the ease of financing

Bank for International Settlements