Liquidity Needs in Economies with Interconnected Financial Obligations

@inproceedings{Rotemberg1987LiquidityNI,
  title={Liquidity Needs in Economies with Interconnected Financial Obligations},
  author={Julio J. Rotemberg},
  year={1987}
}
A model is developed where firms in a financial system have to settle their debts to each other by using a liquid asset (or money). The question that is studied is how many firms must have access to this asset from outside the financial system to make sure that all debts within the system are settled. The main result is that these liquidity needs are larger… CONTINUE READING