This paper proposes a theory of liquidity dynamics. Illiquidity results from asymmetric information. Observing the … perpetuates illiquidity. Liquidity falls in response to unexpected events that lead agents to question their valuation models …

after a once and for all increase in liquidity. The gradual propagation mechanism produced by our model is novel in the … literature. We provide an analytical characterization of this mechanism, showing that the magnitude of the liquidity effect on …

set of assets can be partitioned into three liquidity tiers, which differ in their resalability, their prices, their … a pecuniary externality, which leads to the result that some policies commonly thought to improve liquidity can be …

The paper presents a model of a monetary economy where there are differences in liquidity across assets. Money … on assets, reflecting their differences in liquidity. The model is used, first, to investigate how aggregate activity and … asset prices fluctuate with shocks to productivity and liquidity; second, to examine what role government policy might have …

economy-wide sales of external assets. Consistent with our theory, we find that the predicted liquidity shock has a strong … liquidity shocks, the liquidation price they can get will be lower when buyers know that they have more information on … expectation of future liquidity problems export relatively more FPI than FDI, and (2) this effect strengthens as the source …

We examine how liquidity and asset prices are affected by the following market imperfections: asymmetric information …

I describe two amplifications mechanisms that operate during liquidity crises and discuss the scope for central bank … disengage from markets and increase their demand for liquidity. This behavior leads to a loss of liquidity and a crisis …

the international liquidity management aspect of sterilization over the traditional monetary one, a re-focus that seems … liquidity management issues more generally …