Search-based endogenous illiquidity and the macroeconomy

Arbeitspapier

We endogenize asset liquidity in a dynamic general equilibrium model with search frictions on asset markets. In the model, asset liquidity is tantamount to the ease of issuance and resaleability of private financial claims, which is driven by investors' participation on the search market. Limited resaleability of private claims creates a role for liquid assets, such as government bonds or fiat money, to ease funding constraints. We show that liquidity and asset prices positively co-move. When the capacity of the asset market to channel funds to entrepreneurs deteriorates, the hedging value of liquid assets increases. Our model is thus able to match the flight to liquidity observed during recessions. Finally, we show that investors' search market participation is more intense in a constrained efficient economy.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: DIW Discussion Papers ; No. 1367

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Investment; Capital; Intangible Capital; Capacity ; Financial Markets and the Macroeconomy ; Central Banks and Their Policies
• Thema: endogenous asset liquidity ; search frictions

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Cui, Wei ; Radde, Sören
• Ereignis: Veröffentlichung
• (wer): Deutsches Institut für Wirtschaftsforschung (DIW)
• (wo): Berlin
• (wann): 2014

Weitere Informationen

• Handle: http://hdl.handle.net/10419/95246
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ