Liquidity in The Economics
In economics, different questions with the issue of liquidity are connected, depending on whether it is the perspective of microeconomics or macroeconomics.
Microeconomics
Micro economic logic is meant by the possibility of converting into cash asset into cash. This transformation may be associated with different levels of liquidation costs. The conversion of property funds, for example, is associated with relatively high costs of the transaction. In principle, very specific investments go hand in hand with high liquidation costs. Economically relevant to this finding is that the value of the conversion of assets to continuing value is usually higher than the conversion value destruction. A plot of land or buildings can be used as further, while investment is set in a machine for the production of certain goods by their very specific function. Here, the liquidation could possibly provide nurmehr scrap value.
Transferred to the capital can say the free convertibility of the currency a high degree of realizability, have a negative impact on the national currency. The free cash balance of commercial banks with high overnight deposits, are used within the economic scope for credit creation to use unaffected by the Central Bank or to move their cash into a foreign currency. To keep the external value of the currency as stable as possible, a restriction on the convertibility by the central bank is therefore a measure. The goal is to keep the cash in the normal course.
Macroeconomics
In the macro-economy with liquidity is an existing money supply M1, M2, M3, etc. meant. This is affected by the economy, the velocity of money and monetary policy, the central bank.
Market liquidity
The liquidity of a market depends on the quantity of goods or capital contracts can be traded at any time, without a single transaction affects the market price.
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Tags: central bank, high costs, macroeconomics, Microeconomics, monetary policy, the market price