Unconventional Monetary Policy, Global Liquidity Circulation, and Inflation Divergence around the World

Taeyoon Sung, Jong Hee Kim

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

In the aftermath of the global financial crisis, central banks in advanced economies adopted unconventional monetary policies such as quantitative easing, in addition to conventional policies like low interest rates. However, the increase in global liquidity in terms of key international currencies, driven by unconventional monetary policies, has led some emerging economies to move toward inflation and unstable capital markets. This means that there could be a global divergence of inflation between advanced and emerging economies. This inflation divergence also appears between emerging economies. The emerging economies, distinguished by capital flow control or current account surplus, have little inflation pressure. We suggest that the global divergence of inflation is related to both domestic and international liquidity circulation velocities. In particular, capital control or current account plays a role in determining the velocity of global liquidity circulation.

Original languageEnglish
Pages (from-to)6-26
Number of pages21
JournalDeveloping Economies
Volume54
Issue number1
DOIs
Publication statusPublished - 2016 Mar 1

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monetary policy
liquidity
inflation
divergence
economy
current account
central bank
capital flow
capital market
capital movement
flow control
financial crisis
interest rate
currency
world
Liquidity
Unconventional monetary policy
Divergence
Inflation
Emerging economies

All Science Journal Classification (ASJC) codes

  • Development
  • Economics and Econometrics

Cite this

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Unconventional Monetary Policy, Global Liquidity Circulation, and Inflation Divergence around the World. / Sung, Taeyoon; Kim, Jong Hee.

In: Developing Economies, Vol. 54, No. 1, 01.03.2016, p. 6-26.

Research output: Contribution to journalArticle

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