EconPapers    
Economics at your fingertips  
 

A Tractable Model of Indirect Asset Liquidity

Athanasios Geromichalos and Lucas Herrenbrueck

No 126, Working Papers from University of California, Davis, Department of Economics

Abstract: Assets have ?indirect liquidity? if they cannot be used as media of exchange, but can be traded to obtain a medium of exchange (money) and thereby inherit monetary properties. This essay describes a simple dynamic model of indirect asset liquidity, provides closed form solutions for real and nominal assets, and discusses properties of the solutions. Some of these are standard: assets are imperfect substitutes, asset demand curves slope down, and money is not always neutral. Other properties are more surprising: prices are flexible but appear sticky, and an increase in the supply of indirectly liquid assets can decrease welfare. Because of its simplicity, the model can be useful as a building block inside a larger model, and for teaching concepts from monetary theory

Keywords: monetary-search models; asset liquidity; asset prices; monetary policy (search for similar items in EconPapers)
Pages: 12
Date: 2015-10-13
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
https://repec.dss.ucdavis.edu/files/HrgwmfPtzyGEw6HeJAhpJ9o6/15-3.pdf (application/pdf)

Related works:
Journal Article: A tractable model of indirect asset liquidity (2017) Downloads
Working Paper: A Tractable Model of Indirect Asset Liquidity (2015) Downloads
Working Paper: A Tractable Model of Indirect Asset Liquidity (2015) Downloads
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:cda:wpaper:126

Access Statistics for this paper

More papers in Working Papers from University of California, Davis, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Letters and Science IT Services Unit ().

 
Page updated 2021-03-28
Handle: RePEc:cda:wpaper:126