. We measure the value of funding liquidity from the cross-section of on-the-run premia by adding a liquidity factor to an … arbitrage-free term structure model. As predicted, we find that funding liquidity explains the cross-section of risk premia. An … increase in the value of liquidity predicts lower risk premia for on-the-run and off-the-run bonds but higher risk premia on …

money transfers, the model endogenizes the degree of market segmentation as well as the magnitude of liquidity effects … inflation response to money shock, the liquidity effect and the sluggish price adjustment) are not robust. In an endogenous …, there is no liquidity effect and no sluggish price adjustment. …