Abstract :
We presentatheoryofdifferencesofliquidityacrossassets,basedonan endogenous
rankingofassetsasmediaofexchangearisingfromtheirrelativequalityashedging
devices.Whenassetshavetwodistinctroles,asintertemporalmediaofexchangeand
hedgingdevices,buyershavegenericallyastrictpreferenceforpayingsellerswiththe
assetwhichistherelativebetterhedgingdeviceforsellers.Theconsequenceofthis
preferenceisthattherearethreemonetarypolicyregimes,andtheseregimesdifferin
whichassetsserveasmediaofexchange,whetherassetscarryaliquiditypremium,and
in theimpactthatmonetarypolicyhasonassetprices
