market liquidity increases with the level of intermediary capital. We also characterize conditions under which intermediaries …We present a model of financial market liquidity provided by financially constrained intermediaries. We show that …

balance of three forces: interest rate pass-through, risk shifting, and leverage. When banks can adjust their capital … structures, a monetary easing leads to greater leverage and lower monitoring. However, if a bank's capital structure is fixed …

consumers face uncertain liquidity needs. The ambiguity the consumers experience is modeled by the degree of confidence in their … additive beliefs. We analyze the optimal liquidity allocation and two institutional settings for implementing this allocation … with high liquidity needs. With increasing ambiguity this preference will be reversed: the asset market is preferred, since …