Download or read book Stock Market Liquidity and the Macroeconomy written by Mr.David Cook and published by INTERNATIONAL MONETARY FUND. This book was released on 2005-01-01 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: In a liquid financial market, investors are able to sell large blocks of assets without substantially changing the price. We document a steep drop in the liquidity of the Japanese stock market in the post-bubble period and a steep rise in liquidity risk. We find that, during Japan's deflationary period, firms with more liquid balance sheets were less exposed to stock market liquidity risk, while slowly growing firms were highly exposed to liquidity shocks. Also, aggregate liquidity had macroeconomic effects on aggregate demand through its effect on money demand.