that sectors with larger liquidity needs are more volatile and experience deeper crises in financially underdeveloped countries. At the macro level, the results suggest that changes in financial development can generate important differences in aggregate volatility. An additional finding of this paper

of abuse suggest the evolution of higher mammals to support more sophistithat midbrain dopamine systems are involved in processing reward cated forms of individual and social behavior. Thus biologiinformation and learning approach behavior. Most dopamine neucal and cognitive needs define the nature

Loans are illiquid when a lender needs relationship-specific skills to collect them. Consequently, if the relationship lender needs funds before the loan matures, she may demand to liquidate early, or require a return premium, when she lends directly. Borrowers also risk losing funding. The costs

When faced with current and future liquidity needs, investors may behave myopically by liquidating the liquid securities, leaving the remaining portfolio vulnerable to future liquidity shocks; investors may also behave strategically by holding liquidity due to precautionary or speculative motives

¸˛I wish to thank for Stephen Cecchetti for conversations as well as Michael Woodford for extremely valuable discussions and comments. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

growth volatility. We show that bank concentration magnifies industrial growth volatility, but reduces the volatility in sectors with higher external liquidity needs. The reduction in industrial growth volatility mostly reflects the smoothing in the volatility of real value added per firm growth. A

changes are principally driven by local supply/demand shocks that are independent of both credit-risk factors and standard proxies for liquidity. * Collin-Dufresne is at Carnegie Mellon University. Goldstein is at Washington University in St. Louis. Martin is at Arizona State University. A significant

are settled. The main result is that these liquidity needs are larger when these firms are more interconnected through their debts, i.e., when they borrow from and lend to more firms. Two pecuniary externalities are discussed. One is the result of paying one creditor first rather than another. The second

for individual securities. Securities with concentrated ownership are purchased as pools of related securities. Each bank has private information about its liquidity need and the true common value of each security. We study bidding behavior and performance of sealed‐ bid uniform‐price auctions and dynamic clock

An endogenous growth model with multiple assets is developed. Agents who face random future liquidity needs accumulate capital and a liquid, but unproductive asset. The effects of introducing financial intermediation into this environment are considered. Conditions are pro-vided under which