Definition of Liquidity

Stack of US Dollar banknotes, close-up
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Liquidity refers to how quickly and cheaply an asset can be converted into cash. Money (in the form of cash) is the most liquid asset. Assets that generally can only be sold after a long exhaustive search for a buyer are known as illiquid.

Terms related to Liquidity:

  • Liquidity Trap
  • Liquidity Constraint
  • The Keynes Effect

Resources on Liquidity:

Writing a Term Paper or High School / College Essay? Here are a few starting points for research on Liquidity:

Books on Liquidity

  • Financial crises, liquidity, and the international monetary system - Jean Tirole, Princeton, and Oxford: Princeton University Press, 2002.
  • Cash flow forecasting and liquidity - Brian Coyle, Chicago, Ill. : New York: Glenlake Pub. Co., 2000.
  • Managing corporate liquidity - Chicago: New York: Glenlake Pub., 1999 (2nd edition).

Journal Articles on Liquidity

  • Order Imbalance, Liquidity, and Market Returns - Tarun Chordia, Journal of Financial Economics v65, n1 (July 2002): 111-30.
  • Domestic and International Supply of Liquidity - Bengt Holstrom, American Economic Review v92, n2 (May 2002): 42-45.
  • Bank Bailouts and Aggregate Liquidity - Douglas W. Diamond, American Economic Review v92, n2 (May 2002): 38-41.
  • A Dual Liquidity Model for Emerging Markets - Ricardo J. Caballero, American Economic Review v92, n2 (May 2002): 33-37.
  • Liquidity Risk and Specialness - Andrea Buraschi, Journal of Financial Economics v64, n2 (May 2002): 243-84.
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Moffatt, Mike. "Definition of Liquidity." ThoughtCo, Aug. 27, 2020, Moffatt, Mike. (2020, August 27). Definition of Liquidity. Retrieved from Moffatt, Mike. "Definition of Liquidity." ThoughtCo. (accessed January 27, 2021).