\nexpressed by the spread between the growth of the central banks\u2019 aggregated balance sheets and the growth
\nof global GDP. Derived from the simple equation that MV PY (M: quantity of money, V: velocity of money,
\nPY: nominal GDP), excess liquidity is the rate of money creation above the rate of global GDP expansion
\nwhen assuming the constant velocity of money holds in the equation.<\/li>\n
\ntightness using daily high and low prices (we discussed this measure recently, see Daily FX Liquidity: where do we stand ?<\/em>)<\/li>\n
\nthe market turnover impact on equities returns, was used for S&P 500 Index.<\/li>\n
For all these indices, the lower the index, the more liquid the markets are. <\/strong><\/p>\n Barring the financial crisis of 2008-2009, there has been a continuous series of quick recoveries after turmoil events While many corporate bond traders have seen a diminishing liquidity recently after the inception of Volker Rule, this Private liquidity is an important determinant of global market stability apart from official liquidity that is created by Correlation with leading index and various liquidity indices exhibit a negative sign, which means less liquidity![\"liquidity_indicies_-_fx_money_base_spx_us_fixed_income.jpg\"](\"http:\/\/www.next-finance.net\/http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/05\/liquidity_indicies_-_fx_money_base_spx_us_fixed_income.jpg\")
<\/a><\/p>\n
\n(Taper tantrum, SNB intervention), implying the markets have reacted efficiently. Compared to the historical data
\nsince 2010, broader and general liquidity conditions are not yet in the level to be worried about, except SPX which is
\ncurrently standing at 0.64 standard deviation above the average illiquidity measure.
\nGiven the level of z-score for all asset classes, it appears that stocks look more liquid that they are while bonds are not as illiquid as people
\nbelieve.<\/quote><\/p>\n
\nmarket by nature has infrequent and thin market activities centered, hence longer periods of time to match buy and
\nsell orders are normal. BASI remains tight even with the increasing regulations. US Treasuries Bid-Ask spreads also
\nhave maintained tight since the last crisis. Although other studies of liquidity done by New York Fed show small signs
\nof deteriorations after the Taper tantrum of 2013, liquidity in US Treasuries market overall remains healthy in terms
\nof tightness and is far from the distressed level. <\/p>\n<\/a><\/p>\n
\ncentral banks. With a growing international dependency between financial institutions, however, both types of private
\nliquidity are becoming closely connected to macroeconomic environment over time. Especially, leveraging and
\ndeleveraging cycle of financial institutions can greatly affect the funding viability and credit conditions. Easier credit
\nconditions and increased risk-taking help financial sector activities to enlarge the global liquidity, and when the cycle
\nreverses, deleveraging will reduce liquidity. <\/p>\n<\/a><\/p>\n
\nperiods coincide with lower business activities in US.<\/strong> Increased correlation between liquidity and business
\nactivities after the financial crisis shows an amplified role of cyclical movements in financial conditions. <\/p>\n