Three Liquid Assets

42 Pages Posted: 19 Oct 2021

See all articles by Nicola Amendola

Nicola Amendola

University of Rome Tor Vergata - Department of Economics and Finance

Lorenzo Carbonari

Università di Roma "Tor Vergata"

Leo Ferraris

Charles III University of Madrid

Date Written: October 14, 2021

Abstract

We examine a theoretical model of liquidity with three assets - money, government bonds and equity - that are used for transaction purposes. Money and bonds complement each other in the payment system. The liquidity of equity is derived as an equilibrium outcome. Liquidity cycles arise from the loss of confidence of the traders in the liquidity of the system. Both open market operations and credit easing play a beneficial role for different purposes.

Keywords: Money, Bonds, Equity, Liquidity, Credit Easing.

JEL Classification: E40

Suggested Citation

Amendola, Nicola and Carbonari, Lorenzo and Ferraris, Leo, Three Liquid Assets (October 14, 2021). CEIS Working Paper No. 516, Available at SSRN: https://ssrn.com/abstract=3942882 or http://dx.doi.org/10.2139/ssrn.3942882

Nicola Amendola

University of Rome Tor Vergata - Department of Economics and Finance ( email )

Rome
Italy

Lorenzo Carbonari (Contact Author)

Università di Roma "Tor Vergata" ( email )

Via Columbia 2
Roma, Lazio 00133
Italy

Leo Ferraris

Charles III University of Madrid ( email )

CL. de Madrid 126
Madrid, Madrid 28903
Spain

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