Professor Andrea Eisfeldt from Northwestern University is giving a VGSF research seminar on "Financing Shortfalls and the Value of Aggregate Liquidity " on October 19 (Friday, 15:30-17:00) at Institute for Advanced Studies(HS II),Stumpergasse 56, 1060 Vienna. You can download the paper to be presented at the VGSF webpage (Activities & Events--> Research Seminars). The abstract of the paper is attached below.

Professor Eisfeldt is going to visit BWZ from October 15 to 19. If you would like to meet him at BWZ, please let me know as soon as possible.

Kind regards,

Youchang Wu

This paper studies the level and dynamics of the value of aggregate liquidity induced by firms’ financing shortfalls. We model liquidity and cash flows as internal funds available for investment in an economy where external funds are costly. We study whether the use of liquidity to hedge investment opportunities can generate substantial liquidity premia with empirically observed countercyclical properties, and show how firms’ financial positions affect the value of aggregate liquidity. Cash flows affect the “natural supply” of liquidity and are procyclical. Thus, we argue that shortfalls between firms’ financing needs and available liquid funds are more likely to occur in bad times when current cash flows are low, rendering liquidity premia countercyclical. We investigate the relationship between such shortfalls and the value of aggregate liquidity empirically using US Flow of Funds and Compustat data.