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Measuring Market Liquidity and Liquidity Mismatches across Sectors

Author

Listed:
  • Arthur Akhmetov

    (Bank of Russia, Russian Federation)

  • Anna Burova

    (Bank of Russia, Russian Federation)

  • Natalia Makhankova

    (Bank of Russia, Russian Federation)

  • Alexey Ponomarenko

    (Bank of Russia, Russian Federation)

Abstract

We offer tools for measuring, monitoring and analysing the liquidity of financial markets in the context of various liquidity aspects. The liquidity mismatch concept makes it possible to assess how liquidity risk acceptance varies across economic sectors. We calculate liquidity indices – that is, liquidity mismatch indicators, and conduct a comparative analysis of the degree of liquidity risk acceptance by various sectors of the Russian economy. The values of liquidity indices in the household sector vary significantly across countries, depending on the degree of population involvement in the stock market. We use the proposed tools to assess the development of financial market segments in Russia and conduct cross-country comparisons of the degree of liquidity of capital markets. Higher liquidity of financial markets is associated with a higher development of these markets; however, this is fraught with liquidity risks that may lead to financial losses. Considering the concept of liquidity in various aspects, we expand the discussion of the availability and development of long-term investment financing in Russia.

Suggested Citation

  • Arthur Akhmetov & Anna Burova & Natalia Makhankova & Alexey Ponomarenko, 2021. "Measuring Market Liquidity and Liquidity Mismatches across Sectors," Bank of Russia Working Paper Series wps82, Bank of Russia.
    • Handle: RePEc:bkr:wpaper:wps82
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    References listed on IDEAS

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    More about this item

    Keywords

    market liquidity; liquidity mismatch; liquidity risks; bank-based and market- based financing; financial instruments; balances of financial assets and liabilities;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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