often be understood as an inefficiency of supply. We show that the liquidity under-supply is a non-monotone function of the …

We show that very little is needed to create liquidity under-supply in equilibrium. Credit constraints on demand by …

We show that very little is needed to create liquidity under-supply in equilibrium: only the presence of credit … liquidity under-supply is a non-monotone function of the credit constraint. The non monotonicity stems from the flexibility of … always be liquidity under-supply, no matter how high �2 is. The government should intervene, for example, by taxing …