Does the fiscal multiplier depend on the exchange rate regime and, if so, how strongly? To address this question, we …

This Paper studies equilibrium asset pricing with liquidity risk (the risk arising from unpredictable changes in … liquidity over time). It is shown that the required return on a security depends on its expected illiquidity, the covariances of … its own return, illiquidity with market return, and market illiquidity. This gives rise to a liquidity-adjusted capital …