Liquidity and real equilibrium interest rates: a framework of analysis

Livio Stracca

No 542, Working Paper Series from European Central Bank

Abstract: This paper proposes a general equilibrium model with heterogeneous households and a financial market where each financial instrument provides liquidity services in addition to enabling a transfer of purchasing power over time. Importantly, liquidity services may be asymmetric according to whether the financial instrument is held as an asset or as a liability, and are also agentspecific. The main purpose of the study is to develop an analytical framework and a language for evaluating the effect of (broadly defined) liquidity factors on equilibrium rates of return and intertemporal allocation. JEL Classification: E40, E43

Keywords: financial market; heterogeneity.; liquidity services; Real interest rates (search for similar items in EconPapers)
Date: 2005-11
Note: 335958
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:2005542

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