We develop a model of monetary exchange in over-the-counter (OTC) markets and use it to study the effects of inflation on asset prices, as well as on standard measures of financial liquidity, such as the size of bid-ask spreads, trade volume, and the incentives of dealers to supply immediacy,...

We study the trading dynamics in an asset market where the quality of assets is private information of the owner and finding a counterparty takes time. When trading of a financial asset ceases in equilibrium as a response to an adverse shock to asset quality, a large player can resurrect the...