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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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Abstract

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: http://www.eeassoc.org/index.php?site=JEEA&page=41
Additional Information: © 2010 European Economic Association
Library of Congress subject classification: H Social Sciences > HG Finance
Journal of Economic Literature Classification System: G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice; Investment Decisions
G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing; Trading volume; Bond Interest Rates
G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets
G - Financial Economics > G1 - General Financial Markets > G18 - Government Policy and Regulation
G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
Sets: Departments > Finance
Collections > Economists Online
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 30 Oct 2010 11:00
URL: http://eprints.lse.ac.uk/29778/

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