Market liquidity, asset prices, and welfare

• 成果类型: Article
• 署名作者: Huang, Jennifer; Wang, Jiang
• 署名单位: University of Texas System; University of Texas Austin; Massachusetts Institute of Technology (MIT); National Bureau of Economic Research
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2008.08.008
• 发表日期: 2010
• 页码: 107-127
• 关键词: liquidity; asset prices; welfare; CENTRAL BANK POLICY

摘要

This paper represents an equilibrium model for the demand and supply of liquidity and its impact on asset prices and welfare. We show that, when constant market presence is costly, purely idiosyncratic shocks lead to endogenous demand of liquidity and large price deviations from fundamentals. Moreover, market forces fail to lead to efficient supply of liquidity, which calls for potential policy interventions. However, we demonstrate that different policy tools can yield different efficiency consequences. For example, lowering the cost of supplying liquidity on the spot (e.g., through direct injection of liquidity or relaxation of ex post margin constraints) can decrease welfare while forcing more liquidity supply (e.g., through coordination of market participants) can improve welfare. (C) 2009 Elsevier B.V. All rights reserved.