The Value of Liquidity
20 Pages Posted: 15 Jan 2008
Date Written: January 15, 2008
The objective of this article is to examine four theories that consider an explanation and measurement for the value of liquidity. Liquidity will be understood as cash, that is, we are leaving aside assets of lesser degree of liquidity than cash. The article begins with the Keynesian view about the value of liquidity followed by an exploration of the value of currency in accordance with the Marxists, neoclassical economists and classical economists (Ricardians and Sraffians).
The message of all models is clear. Liquidity always has a positive value, being differentiated in the measurement of it by the value model underlying the theory.
This point of view contrasts with naive proposals on the value of liquidity that only consider the opportunity cost to hold currency, leading to the conclusion that the value of liquidity is null or negative.
Keywords: Liquidity, Value of liquidity, Value of money, Own rates of interest, Keynesian Theory of Money, Marxist Theory of Money, Classical (Sraffian Theory of Money), Neoclassical Theory of Money
JEL Classification: A13,B12, B13, B14, B24, D46, D51, E11, E12, E13
Suggested Citation: Suggested Citation