We endogenize the liquidity and the quality of private assets in a tractable incomplete-market model with heterogeneous agents. The model decomposes the convenience yield of government bond into a "liquidity premium" (flight to liquidity) and a "safety premium" (flight to quality) over the...

We differentiate the liquidity and the quality of private assets in a tractable incomplete-market model with heterogeneous agents. The model decomposes the convenience yield of government bonds into a "liquidity premium" (flight to liquidity) and a "safety premium" (flight to quality) over the...

It is widely believed in the literature that inventory fluctuations are destabilizing to the economy. This paper re-assesses this view by developing an analytically-tractable general-equilibrium model of inventory dynamics based on a precautionary stockout-avoidance motive. The model's...