Liquidity and asset-market dynamics

Guillaume Rocheteau and Randall Wright

Journal of Monetary Economics, 2013, vol. 60, issue 2, 275-294

Abstract: This study analyzes economies with an essential role for liquid assets in the exchange process. The model can generate multiple stationary equilibria, across which asset prices, market participation, capitalization, output and welfare are positively related. It can also generate a variety of nonstationary equilibria, even when fundamentals are deterministic and time invariant, including periodic, chaotic and stochastic (sunspot) equilibria with recurrent market crashes. Some equilibria have asset-price trajectories that resemble bubbles growing and bursting. Endogenous private and public liquidity is also introduced. Sometimes it is efficient to provide enough liquid assets to satiate demand; other times it is not.

Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (61)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304393212001420
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Liquidity and Asset Market Dynamics (2011)
Working Paper: Liquidity and asset market dynamics (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:60:y:2013:i:2:p:275-294

DOI: 10.1016/j.jmoneco.2012.11.002

Access Statistics for this article

Journal of Monetary Economics is currently edited by R. G. King and C. I. Plosser

More articles in Journal of Monetary Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().