Topics in liquidity (Syllabus)

Content

This class covers recent theoretical research on liquidity and financial frictions and its effects on the Macroeconomy. The definitions of liquidity are very broad and imprecise. I view liquidity as being an informal term, that always summarizer a property of an asset. Liquidity can be formally defined as a property where an asset is said to be liquid if the existence of gains from trade are sufficient conditions to observe trade. If an asset is not traded at all or traded with some probability, then the asset is illiquid or partially liquid (p-liquid). Naturally, liquidity will context specific —it will depend on the model.