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Stock Market Liquidity and the Macroeconomy: Evidence from Japan David Cook

Stock Market Liquidity and the Macroeconomy: Evidence from Japan

David Cook

Published January 1st 2005
ISBN : 9786613801432
ebook
60 pages
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 About the Book 

In a liquid financial market, investors are able to sell large blocks of assets without substantially changing the price. We document a steep drop in the liquidity of the Japanese stock market in the post-bubble period and a steep rise in liquidityMoreIn a liquid financial market, investors are able to sell large blocks of assets without substantially changing the price. We document a steep drop in the liquidity of the Japanese stock market in the post-bubble period and a steep rise in liquidity risk. We find that, during Japans deflationary period, firms with more liquid balance sheets were less exposed to stock market liquidity risk, while slowly growing firms were highly exposed to liquidity shocks. Also, aggregate liquidity had macroeconomic effects on aggregate demand through its effect on money demand.