A Conference on Liquidity in Frictional Markets

This paper summarizes the papers that were presented at the Liquidity in Frictional Markets conference in November 2008. The papers, which looked at markets for assets as diverse as houses, bank loans, and electronic funds transfer, all explored that amorphous concept called “liquidity” and how its presence — or absence — affects the economy. Papers presented at the conference and summarized here were: Asset Prices, Liquidity, and Monetary Policy in an Exchange Economy (R. Lagos); Banks, Liquidity Insurance, and Interest on Reserves in a Matching Model of Money (V. Bencivenga, G. Camera); Counterfeiting as Private Money in Mechanism Design (R. Cavalcanti, E. Nosal); Elastic Money, Inflation, and Interest Rate Policy (A. Head, J. Qiu); Information, Liquidity and Asset Prices (B. Lester, A. Postlewaite, R. Wright); Liquidity and Selection in Asset Markets with Search Friction (Y. Kim); Liquidity Provision in Capacity Constrained Markets (P. Weill); Money, Bargaining, and Risk Sharing (N. Jacquet, S. Tan); Precautionary Reserves and the Interbank Market (A. Ashcraft, J. McAndrews, D. Skeie); Price-Level Targeting and Stabilization Policy (A. Berentsen, C. Waller); Systemic Risk and Liquidity in Payment Systems (G. Afonso and H. Shin); Trading Frictions and House Price Dynamics (A Caplin, J. Leahy); Uncertainty, Inflation, and Welfare (J. Chiu, M. Molico); When Banks Lend for Too Long (C. Chamley, C. Rochon)