We propose a simple model to study the efficiency of private liquidity creation by financial intermediaries. Liquidity is provided by both safe and risky debt, and liquidity crises arise when risky debt is defaulted on and stops providing liquidity services. Because of a novel externality...

We provide a theory of fire sales in which potential buyers are subject to liquidity shocks and frictions that limit their ability to resell assets. The model predictions align with some stylized facts about the large sales of corporate bonds and Treasury securities during the COVID-19 economic...

We provide a theory of fire sales in which potential buyers are subject to liquidity shocks and frictions that limit their ability to resell assets. The model predictions align with some stylized facts about the large sales of corporate bonds and Treasury securities during the COVID-19 crisis....