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Inside and Outside Liquidity$
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Bengt Holmstrom and Jean Tirole

Print publication date: 2011

Print ISBN-13: 9780262015783

Published to MIT Press Scholarship Online: August 2013

DOI: 10.7551/mitpress/9780262015783.001.0001

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PRINTED FROM MIT PRESS SCHOLARSHIP ONLINE (www.mitpress.universitypressscholarship.com). (c) Copyright The MIT Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in MITSO for personal use.date: 16 September 2021

Prologue: Motivation and Roadmap

Prologue: Motivation and Roadmap

(p.1) Prologue: Motivation and Roadmap
Inside and Outside Liquidity

Holmström Bengt

Tirole Jean

The MIT Press

This prologue explains that this book aims to show the demand for and supply of liquid assets. It uses insights from the field of modern corporate finance to examine how the Arrow–Debreu model—that suggests in some economic assumptions, there must be a set of prices that aggregate supplies will equal aggregate demands in a particular economic setting—can explain the pricing of assets, the role of liquidity management, decisions on real investments, and how this theory associates with some classic themes in macroeconomics and international finance. The book aims to summarize the main lessons that can be learned from the important themes and approaches in liquidity, and this prologue reflects on the current subprime crisis.

Keywords:   liquidity, Arrow–Debreu model, subprime crisis, macroeconomics

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