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There is no distinction between money in microeconomics or macroeconomics. In both fields money is medium of exchange, unit of account and store of value. The misconception you have probably arises from the role money plays in microeconomics and macroeconomics. In microeconomics money is almost always neutral - that is it has no impact on the real ...


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This is because in order for many business to stay liquid they often have to issue short term debt. Many financial firms need liquidity so much that they literally make loans that are for duration of only one day. However, the more people invest their savings in bonds which are usually long term debt (most bonds have maturity over 5-10y), the less money is ...


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Since I'm a macro rather than a corporate finance guy, my go-to resource for getting a rough sense of aggregate magnitudes is the flow of funds accounts. Take a look at the B.102 balance sheet for nonfinancial corporate business, and also the F.102 flows for nonfinancial corporate business. The relevant insights I draw from this data are: In aggregate ...


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I know very little about this, but check out Jake Zhao's work. He's an AP at Stony Brook. From the abstract, My model finds that 63% of the increase in corporate cash holdings can be accounted for by the increase in cash flow volatility. The increase in cash flow volatility observed in the data arises from a decrease in the correlation between ...


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Etymology and Introduction As a concept to measure the interchangeability of assets and money, liquidity is a new word. It first appears in 1923 in a use by Hawtrey (The Oxford English Dictionary (1989)). The underlying idea however is much older. Menger (1892) calls a good more or less saleable according to the facility to which it can be disposed of at ...


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In rough terms the central bank wants the nominal interest rates low so as a) to incentivize people to consume their income rather than save it and b) to make loans more attractive as they are linked with lower interest, thus bolstering consumption (again). During a crisis however, consumption remains low as expectations of economic growth deteriorate. ...


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In addition to comment given by @dismalscience, here you may find partial answer (hope I got everything right below). Since many similar terms refer to concepts that are close to each other, I'm also regularly fighting to get these somehow in order. For example, there are forward and futures contracts that use similar terms and are related to the yield curve ...


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I think for your purposes, the best answer to the question is what you appear to be anticipating: in certain macroeconomics discussions, "money" operates primarily as a unit of account, because of the convenience it offers in allowing the ability to "measure" all the different forms of economic output with a single unit. In that sense, it plays a similar ...


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Yes. There is a good chapter on this general question in The Valuation Handbook book by Ashok Abbott. It is a whole chapter so it is too long reproduce here. Shortened down, he shows that there is a half-life effect given the amount of volume that a dealer normally carries and how long it normally takes them to liquidate a position. ISBN-10: 0470385790


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As an initial note, I have not seen any plausible claims that a crypto crash would cause liquidity problems for the financial system. As a reult, I would need to guess to the mechanism. I do not think “liquidity” is what anyone should worry about right now. For a firm we need to distinguish between illiquid and insolvent. Illiquid: the firm does not have ...


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The situation you describe, one with negative nominal rates, only can happen with the use of force or where the instrument acts as an insurance policy. In the case where the instrument serves as an insurance policy, the implicit premium is that negative rate. To consider why this is the case, consider two investments. The first investment provides an $\...


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Cash and bonds are almost identical from financial and economic perspective. Most institutional investors and banks keep much of their cash in bonds. Physical cash is becoming a bit obsolete so the notion of "hoarding cash" no longer means taking out bags with dollar bills and stuffing them under the mattress or into the safe box. Hoarding cash nowadays is ...


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A very good question, but first some clarifications. The banking sector is unique from all other industries in that it creates its own liquidity. Banks borrow short term low yield debt and invest in high yield long term assets. The maturity mismatch that occurs in the aggregate is tremendous and not sustainable. Banks are always reliant on individuals ...


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I can think of at least one paper where binding accounting rules are shown to have negative consequences on real investment: Can Tight Accounting Oversight Distort Investment? Evidence from Mortgage Restructurings after the JOBS Act Abstract: I study the effect of accounting oversight on a bank’s level of troubled mortgage restructurings. If banks ...


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