Professor Andrea Eisfeldt from Northwestern University is giving a VGSF
research seminar on "Financing Shortfalls and the Value of Aggregate
Liquidity " on October 19 (Friday, 15:30-17:00) at Institute for Advanced
Studies(HS II),Stumpergasse 56, 1060 Vienna. You can download the paper to
be presented at the VGSF webpage (Activities & Events--> Research
Seminars).
The abstract of the paper is attached below.
Professor Eisfeldt is going to visit BWZ from October 15 to 19. If
you would like to meet him at BWZ, please let me know as soon as
possible.
Kind regards,
Youchang Wu
This paper studies the level and dynamics of the value of aggregate liquidity
induced by firms’ financing shortfalls. We model liquidity and cash flows
as internal funds available for investment in an economy where external funds
are costly. We study whether the use of liquidity to hedge investment
opportunities
can generate substantial liquidity premia with empirically observed
countercyclical properties, and show how firms’ financial positions affect
the
value of aggregate liquidity. Cash flows affect the “natural supply” of
liquidity
and are procyclical. Thus, we argue that shortfalls between firms’ financing
needs and available liquid funds are more likely to occur in bad times when
current cash flows are low, rendering liquidity premia countercyclical. We
investigate
the relationship between such shortfalls and the value of aggregate
liquidity empirically using US Flow of Funds and Compustat data.