Methodology
How the Global Liquidity Index is built
The Global Liquidity Index is our own weekly estimate of the money and credit available to the financial system. It adds up the balance sheets of the 5 biggest central banks and the government debt of the G7 and China, in US dollars, using public data only. It’s updated every day and free for everyone.
What goes in
Central bank liquidity. The money each central bank has put into the system, measured from its balance sheet:
| Central bank | What we use | Source | Updated |
|---|---|---|---|
| Federal Reserve | Total assets, minus the Treasury General Account and reverse repos (Fed net liquidity) | FRED WALCL, WDTGAL, WLRRAL | Weekly |
| European Central Bank | Banknotes, banks’ current accounts and the deposit facility | ECB Data Portal | Weekly |
| Bank of Japan | Monetary base | Bank of Japan Time-Series Data Search | Monthly |
| People’s Bank of China | Total assets | BIS | Monthly data, published quarterly |
| Bank of England | Total assets | BIS | Monthly data, published quarterly |
Government debt. General government debt securities of the United States, Japan, Germany, France, Italy, the United Kingdom, Canada and China, at face value. Banks and funds use this debt as collateral to borrow, so more of it means more room for credit. It comes from the BIS debt securities statistics, which are quarterly and about 6 months behind. Between and after those quarters:
- United States: rolled forward with federal borrowing since the last quarter (the monthly Treasury deficit and the change in the Treasury’s cash account, both from FRED).
- Germany, France and Italy: held at their last value in euros.
- Japan, the UK, Canada and China: grown at their rate over the previous year.
Exchange rates. Weekly closes of the euro, yen, pound, Canadian dollar and yuan against the US dollar, from Yahoo Finance.
How it’s put together
- Every input is lined up on a weekly grid (each Friday since January 2011, plus the current week), using its latest published value on or before each date.
- Everything is converted to US dollars at that week’s exchange rates.
- Central bank liquidity and government debt are combined into one total with fixed weights, chosen from historical data and then tested on later years the weights hadn’t seen.
- The weekly total is smoothed over 4 weeks, so one late or noisy input doesn’t swing the line.
The dashboard shows the latest index next to its inputs in US dollars: each central bank’s balance sheet and the total of government debt, with the date of the newest data behind each one. Because the index is a weighted total, it isn’t the plain sum of those figures.
How often it updates
Our server checks each source through the day and uses new data as soon as it’s published. The index is rebuilt at least every 6 hours, and whenever an input changes. Because the BIS figures arrive months late, the most recent weeks lean on the roll-forwards above and can be revised when the real figures come in.
Checks
- An input that fails validation (out of its normal range, wrong units, a flipped exchange rate) is never used.
- A new estimate that jumps more than 4% in a week, or moves more than 5% from the last one, is held back and the previous estimate stays up.
- An input that’s older than normal for its release schedule is flagged on the dashboard.
Known limits
- It follows the trend and level of global liquidity well, but it can miss the direction of week-to-week moves.
- Government debt is counted at face value, so moves in bond prices don’t show up, and nor does bond market volatility.
- It covers the 5 biggest central banks and the G7 plus China. Smaller economies and offshore dollar markets aren’t included.
- It’s our own estimate, not an official statistic, and it isn’t affiliated with any data provider.
General information only, not financial advice. Data can be delayed, revised or wrong. Sources and credits are listed on our legal page, including: This service uses the API provided by the “Bank of Japan Time-Series Data Search.” The Bank of Japan does not guarantee the content of the service.
The index is free, with no account. Pro adds 100+ charts behind it, from central bank balance sheets to credit spreads, and is free for 10 days.
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