Asset Liquidity, Private Information Acquisition, and Monetary Policy
Abstract: This paper investigates the implications of private information acquisition for asset liquidity. To formalize private information acquisition about the quality of liquid assets, I develop a New-Monetarist model that incorporates a bargaining protocol with private information and strategic information acquisition decisions. The decisions to acquire private information depend on various economic fundamentals and monetary policy, revealing that a higher nominal interest rate encourages the acquisition of private information. The paper identifies a non-monotonic effect of an increased nominal interest rate on asset liquidity, highlighting a novel channel through private information acquisition.
Asset Liquidity and Information Acquisition under Hidden Information Status
Abstract: This paper studies the information asymmetries in asset trading generated through information acquisition. The decision to acquire information is not observed by the counterparty, keeping the information status of the informed agents hidden. I develop a New-Monetarist framework to study the implications of hidden information status for private information acquisition, embedding a screening protocol in order to distinguish the asset quality and the information status simultaneously. The hidden information status provides a strategic advantage to the agents without private information, who can pretend to be informed under certain conditions. For monetary policy implications, an increased nominal interest rate has a non-monotonic effect on private information acquisition.
Information and Liquidity Revisited (with Duhyeong Kim)
Asset Liquidity, Portfolio Management, and the Home Bias Puzzle