over faster than domestic assets because the former have desirable liquidity properties, but represent inferior saving …

portfolios, but liquidity comes at a cost: inflation. The OTC market serves as a secondary asset market, in which agents can … rebalance their positions depending on their liquidity needs. Hence, a contribution of our paper is to provide a micro …

rates of return to compensate agents for their relative lack of liquidity. Consistent with empirical findings, our model …

by the degree of liquidity in the secondary asset market. …