Template-Type: ReDIF-Paper 1.0
Author-Name: Athanasios Geromichalos
Author-Name-First: Athanasios
Author-Name-Last: Geromichalos
Author-Name: Lucas Herrenbrueck
Author-Name-First: Lucas
Author-Name-Last: Herrenbrueck
Author-Workplace-Name: Department of Economics, University of California Davis
Title: A Tractable Model of Indirect Asset Liquidity
Abstract: Assets have ?indirect liquidity? if they cannot be used as media of exchange,
 but can be traded to obtain a medium of exchange (money) and thereby
 inherit monetary properties. This essay describes a simple dynamic model of indirect
 asset liquidity, provides closed form solutions for real and nominal assets,
 and discusses properties of the solutions. Some of these are standard: assets are
 imperfect substitutes, asset demand curves slope down, and money is not always
 neutral. Other properties are more surprising: prices are flexible but appear sticky,
 and an increase in the supply of indirectly liquid assets can decrease welfare. Because
 of its simplicity, the model can be useful as a building block inside a larger
 model, and for teaching concepts from monetary theory
Length: 12
File-URL: https://repec.dss.ucdavis.edu/files/HrgwmfPtzyGEw6HeJAhpJ9o6/15-3.pdf
File-Format: application/pdf
Number: 126
Classification-JEL: 
KeyWords: monetary-search models, asset liquidity, asset prices, monetary policy
Creation-Date: 20151013
Handle: RePEc:cda:wpaper:126