ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

International FinanceSubscribe to International Finance

Strange and Worrying International Market Liquidity

There seems to be a rise in illusory liquidity in international markets, which appears to be plentiful in quiet times, but vanishes at other times. “Flash crashes” are more frequent. Reforms that have made banks safer have contributed to this, leading to a withdrawal of short-term market participants, and causing long-term investors to act short term. There seems to be a trade-off between day-to-day liquidity and what I call “systemic liquidity.”

Lessons from the Field

Foreign Exchange, International Finance and Risk Management by A V Rajwade; 3rd edition, Academy of Business Studies, New Delhi, April 2000; pp xvi + 542, Rs 440.
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