Private and Public Supply of Liquidity

Holmström, Bengt; Tirole, Jean

doi:10.1086/250001

Cited by 1,397 publications

(741 citation statements)

References 25 publications

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“…We are restricting ourselves to parametrisations that make it optimal to pay the liquidity shock; therefore, conditional on always paying the liquidity shock, the choice of technology can be summarised by a Markov process with transition probabilities γ and α, as shown in Figure 2. 10 9 The liquidity shock is modelled in a similar fashion to Holmstrőm and Tirole (1998). From a theoretical point of view the shock need not be correlated with the probability of success of the project.…”

Section: Technologymentioning

confidence: 99%

Trade Credit: Suppliers as Debt Collectors and Insurance Providers

2006

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Section: Technologymentioning

confidence: 99%

Trade Credit: Suppliers as Debt Collectors and Insurance Providers

2006

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“…We present a model of liquidity management based on Tirole (1998) andTirole (2006). The model is meant to provide a unifying framework that helps to understand many of the key results in the liquidity management literature.…”

Section: How Much Liquidity To Hold: Theory and Evidencementioning

confidence: 99%

“…In fact, as Holmstrom and Tirole (1998) argue, there are good reasons for firms to hold government-backed assets.…”

mentioning

confidence: 99%

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Corporate Liquidity Management: A Conceptual Framework and Survey

Almeida¹,

Campello²,

Cunha³

et al. 2013

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Ensuring that a firm has sufficient liquidity to finance valuable projects that occur in the future is at the heart of the practice of financial management. Yet, while discussion of these issues goes back at least to Keynes (1936), a substantial literature on the ways in which firms manage liquidity has developed only recently. We argue that many of the key issues in liquidity management can be understood through the lens of a framework in which firms face financial constraints and wish to ensure efficient investment in the future. We present such a model and use it to survey many of the empirical findings on liquidity management.Much of the variation in the quantity of liquidity can be explained by the precautionary demand for liquidity. While there are alternatives to cash holdings such as hedging or lines of credit, cash remains "king", in that it still is the predominate way in which firms ensure future liquidity for future investments. We discuss theories on the choice of liquidity measures and related empirical evidence. In addition, we discuss agency-based theories of liquidity, the real effects of liquidity choices, and the impact of the 2008-9 Financial Crisis on firms' liquidity management.

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“…Liquidity can be created off balance sheet also with the help of loan commitments or other liquid funds (Kashyap, Rajanand Stein [8] and Holmstrom and Tirole [9]). A simple way to understand liquidity creation is that it is based on the fact that banks are simultaneously able to provide illiquid loans to borrowers while also having enough reserves to ensure that depositors are able to withdraw funds at par value whenever they want.…”

Section: Introductionmentioning

confidence: 99%

Effect of Financial Development on the Transmission of Monetary Policy

Seth¹,

Kalyanaraman²

2017

TEL

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This paper looks at the effect of financial development on output and bank liquidity by doing a cross-country analysis of 119 countries across 18 years from 1997-2014. We develop three hypotheses by combining multiple strands of literature which have heretofore existed in parallel. The main research question is whether financial development serves to provide greater bank liquidity and whether it does indeed stimulate output growth. This question is of particular relevance when there are changes in monetary policy. This paper goes to the heart of examining whether monetary policy is transmitted more effectively with better financial development and whether the goal to achieve output changes via monetary policy is better effected in an environment of developed financial markets. Our results support the hypotheses that financial development positively impacts output, and negatively affects bank liquidity. We also show that with financial development, the effect of bank liquidity on output is heightened.

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Private and Public Supply of Liquidity

Cited by 1,397 publications

References 25 publications

Trade Credit: Suppliers as Debt Collectors and Insurance Providers

Trade Credit: Suppliers as Debt Collectors and Insurance Providers

Corporate Liquidity Management: A Conceptual Framework and Survey

Effect of Financial Development on the Transmission of Monetary Policy

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