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A Tractable Model of Indirect Asset Liquidity

Lucas Herrenbrueck and Athanasios Geromichalos ()
Additional contact information
Athanasios Geromichalos: University of California – Davis, http://faculty.econ.ucdavis.edu/faculty/geromich/

Discussion Papers from Department of Economics, Simon Fraser University

Abstract: 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 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)
JEL-codes: E41 E51 E52 G12 (search for similar items in EconPapers)
Pages: 13
Date: 2015-09
New Economics Papers: this item is included in nep-mac
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http://www.sfu.ca/econ-research/RePEc/sfu/sfudps/dp15-08.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
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