IDEAS home Printed from https://ideas.repec.org/a/inm/ormnsc/v69y2023i9p5578-5595.html
   My bibliography  Save this article

Managing Liquidity

Author

Listed:
  • Zhixiong Zeng

    (Research Center for Central China Economic and Social Development, and School of Economics and Management, Nanchang University, Nanchang 330031, China)

  • Yi Jin

    (Research Institute of Economics and Management, Southwestern University of Finance and Economics, Chengdu 611130, China)

Abstract

This paper studies how liquidity management affects asset markets and aggregate economic performance. We explore the connection between liquidity allocation and capital allocation. The policy that changes the liquidity premia on assets has broad implications for private-sector behavior and market efficiency. Liquidity tightening, that is, a reduction in the aggregate quantity of liquid debt, is associated with credit loosening, that is, an increase in funds raised through the issuance of private liquid debt. A positive liquidity premium on debt is required for capital-allocation efficiency, while a zero-liquidity premium is required for liquidity-allocation efficiency. The optimal policy balances these two considerations. Government purchase of private debt is needed to support low interest rates. The analysis is extended to incorporate the liquidity differential between public and private debt and partially liquid capital.

Suggested Citation

  • Zhixiong Zeng & Yi Jin, 2023. "Managing Liquidity," Management Science, INFORMS, vol. 69(9), pages 5578-5595, September.
    • Handle: RePEc:inm:ormnsc:v:69:y:2023:i:9:p:5578-5595
    DOI: 10.1287/mnsc.2022.4559
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mnsc.2022.4559
    Download Restriction: no
    File URL: https://libkey.io/10.1287/mnsc.2022.4559?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:69:y:2023:i:9:p:5578-5595. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.