Authors: Joon Myoung Woo(BOK), Jieun Lee(BOK)

This paper proposes a new method of estimating implied liquidity that reflects the real business cycles by using three measures of liquidity―bank credit, M2 and Lf, and examines the relationship between the implied liquidity and macroeconomic variables. Our empirical results show that each liquidity measure, especially bank credit was greater than the implied liquidity estimates before the global financial crisis and then has come to move around the implied liquidity since 2012. We also find that a positive shock on real GDP leads to an increase in liquidity including the implied liquidity and further increases in house prices and inflation, and that a positive shock on liquidity has more significant impacts on house prices rather than inflation. Overall, these results indicate that this new measure that captures the multi-dimensionality of liquidity, which is differentiated from previous studies, can provide a good reference to evaluate the extent to which actual liquidity deviates from its equilibrium.