Policy-makers need to tackle ‘liquidity illusion’ – Carstens

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Agustín Carstens

Asset managers’ rise to prominence is changing markets in ways that are not yet fully understood, potentially creating a “liquidity illusion” that policy-makers should seek to dispel, Agustín Carstens said in a recent speech.

The Bank for International Settlements general manager said an unintended consequence of the 2008 crisis response was to encourage debt accumulation in smaller advanced economies and emerging markets. Low interest rates encouraged investors to hunt for higher yields,

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