The Value of Liquidity

20 Pages Posted: 15 Jan 2008

See all articles by Leonardo Cruz Basso

Leonardo Cruz Basso

Mackenzie Presbyterian University - Business Administration

Date Written: January 15, 2008

Abstract

The objective of this article is to examine four theories that consider an explanation and measurement for the value of liquidity. Liquidity will be understood as cash, that is, we are leaving aside assets of lesser degree of liquidity than cash. The article begins with the Keynesian view about the value of liquidity followed by an exploration of the value of currency in accordance with the Marxists, neoclassical economists and classical economists (Ricardians and Sraffians).

The message of all models is clear. Liquidity always has a positive value, being differentiated in the measurement of it by the value model underlying the theory.

This point of view contrasts with naive proposals on the value of liquidity that only consider the opportunity cost to hold currency, leading to the conclusion that the value of liquidity is null or negative.

Keywords: Liquidity, Value of liquidity, Value of money, Own rates of interest, Keynesian Theory of Money, Marxist Theory of Money, Classical (Sraffian Theory of Money), Neoclassical Theory of Money

JEL Classification: A13,B12, B13, B14, B24, D46, D51, E11, E12, E13

Suggested Citation

Cruz Basso, Leonardo, The Value of Liquidity (January 15, 2008). Available at SSRN: https://ssrn.com/abstract=1083995 or http://dx.doi.org/10.2139/ssrn.1083995

Leonardo Cruz Basso (Contact Author)

Mackenzie Presbyterian University - Business Administration ( email )

Rua da Consolacao, 896 7 - andar sala 73
01302-907 Sao Paulo
Brazil
+55 11 32368597 (Phone)
+55 11 32368600 (Fax)

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