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Three Liquid Assets

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Abstract

We examine a theoretical model of liquidity with three assets {money, government bonds and equity- that are used for transaction purposes. Money and bonds complement each other in the payment system. The liquidity of equity is derived as an equilibrium outcome. Liquidity cycles arise from the loss of confidence of the traders in the liquidity of the system. Both open market operations and credit easing play a beneficial role for different purposes.

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  • Nicola Amendola & Lorenzo Carbonari & Leo Ferraris, 2021. "Three Liquid Assets," CEIS Research Paper 516, Tor Vergata University, CEIS, revised 14 Oct 2021.
    • Handle: RePEc:rtv:ceisrp:516
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    More about this item

    Keywords

    Money; Bonds; Equity; Liquidity; Credit Easing.;
    All these keywords.

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General

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