A look at the disadvantages of a firm's having too much liquidity, explaining that when a company has a great deal of its worth tied up in liquid assets, it has a harder time attracting investors, who must be convinced that the firm's managers will not "take the money and run."

The terrorist attacks of 9/11 triggered a staggering increase in demand for U.S. dollars all over the world, a demand that threatened to disrupt the American payments system but was met swiftly and successfully by the Federal Reserve. Earlier in the nation’s history, the system didn’t...

When short-term interest rates hover near zero, central banks may have difficulty offsetting downward momentum on prices and economic activity through traditional monetary-policy channels, since commercial banks have little incentive to make loans. Economists refer to this situation as a...