We broadly define liquid assets, or monetary assets, as any asset that can be readily sold in the market and can be held by a number of people in succession before maturity. We ask in what environment is the circulation of liquid assets essential for the smooth running of the economy. By developing a canonical model of a monetary economy (i.e., where the circulation of liquid assets is essential), we are able to examine the interaction between liquidity, asset prices, and aggregate economic activity.
All Science Journal Classification (ASJC) codes
- Economics and Econometrics