A model of the liquidity structure based on asset indivisibility

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Abstract

Although the notion of a liquidity structure of asset yields is widely accepted, there do not seem to be models of such a structure. Here, the liquidity of an asset is taken to be its transaction velocity, the amount traded per unit time divided by the stock. Assets are assumed to be indivisible and to differ in size. Trade using such assets is implied by pairwise matching and absence-of-double-coincidence in produced goods. It is shown that a sufficiently large asset has a lower velocity and a higher yield than a sufficiently small asset.

Original languageEnglish (US)
Pages (from-to)55-68
Number of pages14
JournalJournal of Monetary Economics
Volume45
Issue number1
DOIs
StatePublished - Feb 2000

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

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