Crises and liquidity in over-the-counter markets

• 成果类型: Article
• 署名作者: Lagos, Ricardo; Rocheteau, Guillaume; Weill, Pierre-Olivier
• 署名单位: University of California System; University of California Los Angeles; New York University; National Bureau of Economic Research; University of California System; University of California Irvine; Federal Reserve System - USA; Federal Reserve Bank - Cleveland
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2011.10.001
• 发表日期: 2011
• 页码: 2169-2205
• 关键词: liquidity; Asset inventories; Execution delays; search; bargaining

摘要

We study the efficiency of liquidity provision by dealers and the desirability of policy intervention in over-the-counter (OTC) markets during crises. We emphasizes two OTC frictions: finding counterparties takes time, and trade is bilateral and involves bargaining. We model a crisis as a shock that reduces investors' asset demands, lasting until a random recovery time. In this context, dealers can provide liquidity to investors by accumulating asset inventories. When OTC frictions are severe, even well capitalized dealers may not find it privately optimal to accumulate inventories, and direct purchase by the government can improve welfare. (C) 2011 Elsevier Inc. All rights reserved.