In the post-crisis period, increased regulation of financial intermediaries led to a significant decline in corporate … bond market liquidity. In order to stabilize these markets, policy makers recently proposed that the trading of corporate … only if it is feasible for him to also affect market liquidity, by either increasing or decreasing it. …

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, if needed (a definition of liquidity closer to the one adopted in … finance)? We develop a model where these two notions of asset liquidity coexist, and their relative importance is determined …

traders decrease more than those of small traders. Using a structural estimation, the model is able to identify liquidity …