Global liquidity has become a key focus of international policy debates over recent years. This reflects the view that global liquidity and its drivers are of major importance for international financial stability, both in the build-up phase for vulnerabilities and when any resulting financial imbalances unwind. This is for at least four reasons: (i) with increasing financial integration, global financial conditions have a growing impact on domestic economic conditions in each country, affecting international capital flows and the dynamics of credit, financial asset and property prices in all major economies; (ii) global liquidity can contribute to the build-up of financial system vulnerabilities in the form of large mismatches across currencies, maturities and countries; (iii) shortages of global liquidity can have important implications for economic growth, as experienced in 2008–09; and (iv) policy responses to these shortages, such as the accumulation of precautionary reserves, can affect capital flow patterns and financial markets more broadly.[...]