Advanced Search
MyIDEAS: Login to save this paper or follow this series

Liquidity and Asset Prices

Contents:

Author Info

  • Raphael A. Espinoza
  • Dimitrios P. Tsomocos

Abstract

We show in an exchange economy with liquidity constraints that the volume of trade and asset prices depend on both the supply of liquidity by the Central Bank and on the liquidity of assets and commodities.� As a result, monetary aggregates are informative for the assessment of economic developments and the conduct of monetary policy.� We also show that the positive correlation between state prices and the future spot rate generates a risk-premium in the term structure of interest rates, even in absence of aggregate uncertainty.� These results do not obtain in representative agent models but hold in any monetary economy with heterogeneous agents and short-term liquidity effects, where monetary costs act as transaction costs and the quantity theory of money is verified.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://economics.ouls.ox.ac.uk/14085/1/2008fe28.pdf
Download Restriction: no

Bibliographic Info

Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 2008fe28.

as in new window
Length:
Date of creation: 01 Jul 2008
Date of revision:
Handle: RePEc:oxf:wpaper:2008fe28

Contact details of provider:
Postal: Manor Rd. Building, Oxford, OX1 3UQ
Email:
Web page: http://www.economics.ox.ac.uk/
More information through EDIRC

Related research

Keywords: Liquidity; Cash-in-Advance Constraints; Term Structure of Interest Rates;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Grossman, S J & Melino, Angelo & Shiller, Robert J, 1987. "Estimating the Continuous-Time Consumption-Based Asset-Pricing Model," Journal of Business & Economic Statistics, American Statistical Association, vol. 5(3), pages 315-27, July.
  2. Backus, David K. & Gregory, Allan W. & Zin, Stanley E., 1989. "Risk premiums in the term structure : Evidence from artificial economies," Journal of Monetary Economics, Elsevier, vol. 24(3), pages 371-399, November.
  3. Dubey, Pradeep & Geanakoplos, John, 2003. "Monetary equilibrium with missing markets," Journal of Mathematical Economics, Elsevier, vol. 39(5-6), pages 585-618, July.
  4. Svensson, Lars E O, 1985. "Money and Asset Prices in a Cash-in-Advance Economy," Journal of Political Economy, University of Chicago Press, vol. 93(5), pages 919-44, October.
  5. Raphaël Espinoza & Charles. Goodhart & Dimitrios Tsomocos, 2009. "State prices, liquidity, and default," Economic Theory, Springer, vol. 39(2), pages 177-194, May.
  6. Robert E. Lucas Jr. & Nancy L. Stokey, 1982. "Optimal Fiscal and Monetary Policy in an Economy Without Capital," Discussion Papers 532, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  7. Min Fan, 2006. "Heterogeneous Beliefs, the Term Structure and Time-varying Risk Premia," Annals of Finance, Springer, vol. 2(3), pages 259-285, July.
  8. Dimitrios P Tsomocos, 2006. "Generic Determinacy and Money Non-Neutrality of International Monetary Equilibria," Economics Series Working Papers 2006-FE-07, University of Oxford, Department of Economics.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Charles A. E. Goodhart & Dimitrios P. Tsomocos, 2011. "The Role of Default in Macroeconomics," IMES Discussion Paper Series 11-E-23, Institute for Monetary and Economic Studies, Bank of Japan.
  2. Dimitrios Tsomocos & Juan Francisco Martinez Sepulveda, 2012. "Liquidity effects on asset prices, financial stability and economic resilience," 2012 Meeting Papers 916, Society for Economic Dynamics.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:oxf:wpaper:2008fe28. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Caroline Wise).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.