compares the Federal Reserve's actions with the literature on optimal policy in a liquidity trap. The theory suggests that, to … securities markets can restore liquidity with fewer government funds than extending credit to the originators of loans …

This paper summarizes and explains the main events of the liquidity and credit crunch in 2007-08. Starting with the …

We provide a model that links an asset's market liquidity - i.e., the ease with which it is traded - and traders …' funding liquidity - i.e., the ease with which they can obtain funding. Traders provide market liquidity, and their ability to … are charged, depend on the assets' market liquidity. We show that, under certain conditions, margins are destabilizing and …

overshooting and a reduced liquidation value for the distressed trader. Hence, the market is illiquid when liquidity is most needed …