Economists often say that certain types of assets, e.g., Treasury bonds, are very "liquid". Do they mean that these assets are likely to serve as media of exchange or collateral (a definition of liquidity often employed in monetary theory), or that they can be easily sold in a secondary market,...

We develop a dynamic general equilibrium model to analyze the effects of central bank purchases of government bonds by investigating the following three questions: Under what conditions are these purchases socially desirable, what incentive problems do they mitigate, and how large are these...

In times of financial distress, central banks provide unlimited liquidity to avoid fire sales. In response, banks raise their demand for collateral assets, and the short-term scarcity of collateral securities leads to higher prices, the Fire Buy premium. To avoid collateral scarcity, central...