Inside and Outside Liquidity
Why do financial institutions, industrial companies, and households hold low-yielding money balances, Treasury bills, and other liquid assets? When and to what extent can the state and international financial markets make up for a shortage of liquid assets, allowing agents to save and share risk more effectively? These questions are at the center of all financial crises, including the current global one. In Inside and Outside Liquidity, leading economists Bengt Holmström and Jean Tirole offer an original, unified perspective on these questions drawing on insights from modern corporate finance. In a slight, but important departure from the standard theory of finance, they show how imperfect pledgeability of corporate income leads to a demand for as well as a shortage of liquidity with interesting implications for the pricing of assets, investment decisions, and liquidity management. The government has an active role to play in improving risk-sharing between consumers with limited commitment power and firms dealing with the high costs of potential liquidity shortages. In this perspective, private risk sharing is always imperfect and may lead to financial crises that can be alleviated through government interventions. In an epilogue, Holmström and Tirole show how their theory can be used to understand some aspects of the recent financial crisis.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
When requesting a correction, please mention this item's handle: RePEc:mtp:titles:0262518536. 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: (Jake Furbush)
If references are entirely missing, you can add them using this form.