A taxonomy of liquidity
- Authors: Culham, James
- Date: 2020
- Type: Text , Journal article
- Relation: International Journal of Political Economy Vol. 49, no. 3 (2020), p. 188-202
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- Description: The term “liquidity” covers many concepts but is generally taken to refer to the ease of convertibility into money. The literature classifies this ease of convertibility as “market liquidity” to distinguish it from “funding liquidity,” which represents the ease of obtaining funding. Many other forms of liquidity can be identified that do not receive their own specific classification. A more granular taxonomy that clarifies and distinguishes each form would permit greater analytical precision when investigating empirical evidence. This paper offers such a taxonomy. © 2020 Taylor & Francis Group, LLC.
Exchange liquidity and redemption liquidity
- Authors: Culham, James
- Date: 2023
- Type: Text , Journal article
- Relation: Cambridge Journal of Economics Vol. 47, no. 3 (2023), p. 667-679
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- Description: Disagreements over the nature of money and consequent confusions regarding liquidity contribute to difficulties integrating monetary theory into the theory of value. For example, an abundance of market liquidity is assumed in asset pricing, whereas a scarcity of monetary liquidity is deemed necessary for consumer price-level determinacy. This paper builds on the insights gained from the evolution of finance to introduce a distinction between exchange liquidity and redemption liquidity as a means of resolving this conceptual dissonance. Both exchange and redemption liquidity can be conceptualised as types of financial option differing in the exercise mechanism offered to the option holder by the option-writer. © 2023 The Author(s). Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved.
Time, equilibrium and uncertainty : Bergson and Robinson
- Authors: Culham, James
- Date: 2023
- Type: Text , Journal article
- Relation: Cambridge Journal of Economics Vol. 47, no. 5 (2023), p. 909-930
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- Description: The philosophy of Henri Bergson can lend fresh perspectives on some central aspects of post-Keynesian economic thought. Bergson’s concept of duration offers philosophical reinforcement for Joan Robinson’s criticisms of the treatment of time, equilibrium and uncertainty in economics.When the economy is recognised to be a dynamic living system, in which the accumulation of capital is an historical process inseparable from technical innovation, the effect of time is of utmost importance. Duration provides greater understanding of an economy moving through historical time, while adding depth to Robinson’s doubts about the validity of utility, and consequently expected utility theory. Bergson’s philosophy of evolution and duration provides a valuable basis for understanding many of the classical issues in political economy. © The Author(s) 2023. Published by Oxford University Press on behalf of the Cambridge Political Economy Society.
Revisiting the concept of liquidity in liquidity preference
- Authors: Culham, James
- Date: 2020
- Type: Text , Journal article
- Relation: Cambridge Journal of Economics Vol. 44, no. 3 (2020), p. 491-505
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- Description: This paper revisits Keynes's theory of liquidity preference to emphasise its reliance on liquidity. By clarifying the meaning of 'liquidity' in the context of the theory, it is argued that liquidity preference is not based on the demand for money, the most tradable asset, or a theory of bearishness. Instead, liquidity preference represents a demand for price-protected (capital-safe) assets, most directly inside and outside money, but also cash-equivalent quasi-money such as self-liquidating assets and security repurchase agreements (repo). The theory of liquidity preference explains that the public is willing to forgo interest income to hold short-term price-protected assets due to the capital and price uncertainty associated with relying on market liquidity, or how easy it is to convert an asset into money. It follows that the rate of interest is a monetary phenomenon and is determined independently of saving and investment. © 2019 The Author(s) 2019. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved.
A conceptual framework for a theory of liquidity
- Authors: Culham, James
- Date: 2018
- Type: Text , Thesis , Masters , PhD
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- Description: This study contributes to the understanding of liquidity in two ways. First, it considers the multifaceted nature of liquidity and its relationship with money. Second, it constructs a conceptual framework for a theory of liquidity. The first contribution is achieved by clarifying and categorising the various forms of liquidity to identify those overlooked by the existing literature. The second contribution consists of a realist critique of the literature on liquidity and money to highlight the strengths and weaknesses of each theoretical approach. The study reflects on the attempts to analyse liquidity using moneyless models of perfect barter with the assumption that every commodity exhibits perfect saleability; an assumption that removes any need for a medium of exchange and, moreover, crowds out all other forms of liquidity. It is concluded that, because liquidity is a social and monetary phenomenon, it cannot be analysed with models populated by a representative agent consuming a single commodity. Furthermore, this conclusion is not altered by the introduction of ‘financial frictions’, which are fundamentally at odds with the nature of money. Instead, the clarification of the nature of liquidity forms the basis for an interpretation of Keynes’s theory of liquidity preference that emphasises its reliance on liquidity in general, not money in particular. The study introduces the terms redemption liquidity and exchange liquidity to explain the trade-off that underpins the theory of liquidity preference. Properly interpreted, the theory of liquidity preference can then address many of the deficiencies prevalent in the dominant theories of the rate of interest. The study therefore has implications for monetary policy and asset pricing.
- Description: Doctor of Philosophy