Liquidity and Financial Intermediation
This paper examines the errect of liquidity prden'nce on investment, output, and prices in competitive markets, with allernative struclures of financial intermediation. The need for liquidity is due to uncertainty in the preferences of individuals. Investment in physical capilal is unobservable, and so illiquid. Individuals are willing to carry liquid assets which are dominaled in lheir rate of return. We examine three types of economies: one with money, the second with bonds, and the third with investment banking. Monetary and interest rate policiles can have expansionary effects; the qualitative impact of policy interventions differ across asset structures. We also examine the aggregate provision for liquidity, as well as liquidity and term premia at equilibrium.
|Date of creation:||01 Aug 1993|
|Date of revision:|
|Contact details of provider:|| Postal: |
Fax: +32 10474304
Web page: http://www.uclouvain.be/core
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:cor:louvco:1993030. 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: (Alain GILLIS)
If references are entirely missing, you can add them using this form.