Inside and Outside Liquidity

Bengt Holmström and Jean Tirole

"In this excellent book, Holmstrom and Tirole put together a unified theory of liquidity, with applications ranging from the impact of liquidity on asset prices to the liquidity enhancing role of government debt, and the importance of international liquidity. In addition to academics and students of economics, it will appeal to people who work at central banks and international organizations. It is an important contribution." Franklin Allen , Nippon Life Professor of Finance and Professor of Economics, The Wharton School, University of Pennsylvania "The Holmstrom-Tirole view of liquidity creation, pricing, and management has had a profound impact on a wide variety of fields, ranging from macroeconomics to corporate finance. This book is assured to become an instant classic." Ricardo Caballero , Ford International Professor of Economics, MIT "The policy discussions surrounding the recent financial turmoil highlight our crucial need for a unified theoretical framework within which to analyze the asset price impact of liquidity, its macroeconomic consequences, and the role of government intervention. This book simultaneously answers these three questions and is a landmark contribution. It is likely to inspire much subsequent research in both macroeconomics and finance." Pierre-Olivier Weill , UCLA "This is a very insightful book on a difficult and poorly understood topic at the center of the current financial crisis. It benefits from a unified approach, based on incentive theory, that delivers a coherent perspective on the elusive concept of liquidity." Xavier Vives , IESE Business School, Barcelona