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A model of financial market liquidity based on intermediary capital

Gromb, Denis and Vayanos, Dimitri (2010) A model of financial market liquidity based on intermediary capital. Journal of the European Economic Association, 8 (2-3). pp. 456-466. ISSN 1542-4774

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Identification Number: 10.1111/j.1542-4774.2010.tb00516.x


We present a model of financial market liquidity provided by financially constrained intermediaries. We show that market liquidity increases with the level of intermediary capital.We also characterize conditions under which intermediaries play a stabilizing or destabilizing role in markets. Finally, we sketch a number of areas, including welfare and public policy, on which the model can shed light.

Item Type: Article
Official URL:
Additional Information: © 2010 European Economic Association
Subjects: H Social Sciences > HG Finance
Sets: Departments > Finance
Collections > Economists Online
Date Deposited: 30 Oct 2010 11:00
Last Modified: 17 Oct 2012 15:11

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