Economics with Market Liquidity Risk

Viral Acharya and Lasse Pedersen

Critical Finance Review, 2019, vol. 8, issue 1-2, 111-125

Abstract: For markets to work efficiently, buyers and sellers must be able to transact easily. People must have access to a marketplace such as a supermarket or a stock exchange with adequate liquidity. Further, people must have confidence that such a well-functioning marketplace will also exist in the future. Market liquidity risk is the risk that the market will function poorly in the future, handcuffing the “invisible hand†through which markets produce allocative efficiency. We discuss the effects of market liquidity risk on asset pricing, investment management, corporate finance, banking, financial crises, macroeconomics, monetary policy, fiscal policy, and other economic areas.

Keywords: Liquidity risk; Asset pricing; Corporate finance; Crises; Macroeconomics; Monetary policy (search for similar items in EconPapers)
JEL-codes: E44 E52 G01 G12 G30 H12 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:now:jnlcfr:104.00000083

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