Endogenous liquidity and volatility

• 成果类型: Article
• 署名作者: Rocheteau, Guillaume; Wang, Lu
• 署名单位: University of California System; University of California Irvine
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2023.105652
• 发表日期: 2023
• 关键词: search; money; liquidity; Extrinsic uncertainty

摘要

Is asset liquidity a source of price volatility? We answer this question within a continuous-time, New Monetarist economy under extrinsic uncertainty where the role of an asset to finance expenditure shocks depends on its pledgeability. If assets are intrinsically valuable and pledgeability is exogenous, then their prices are invariant to extrinsic uncertainty - unlike environments with discrete-time pricing that can feature sunspot equilibria. We derive conditions under which extrinsic uncertainty matters when pledgeability is endogenous and varies with the asset price or its rate of return. In the latter case, we link sunspot equilibria to deterministic cycles. (c) 2023 Elsevier Inc. All rights reserved.