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Both investors and borrowers are concerned about liquidity. Investors desire liquidity because they are uncertain about … when they will want to eliminate their holding of a financial asset. Borrowers are concerned about liquidity because they … compensation for the illiquidity investors will be subject to. We argue that banks can resolve these liquidity problems that arise …
Persistent link: https://www.econbiz.de/10012471328
We explore the connection between money, banks, and aggregate credit. We start with a simple real' model without money, where banks make loans repayable in goods and depositors hold claims on the bank payable on demand in goods. Aggregate production may be delayed in the economy. If so, we show...
Persistent link: https://www.econbiz.de/10012468624