Revisiting the notion of liquidity

Abstract

The evident conceptual dissonance observed in the existing literature on liquidity necessitates a comprehensive examination of its foundational aspects. Despite numerous efforts by scholars and practitioners to establish a clear and universally applicable definition of liquidity, a consensus has yet to be achieved. This article presents a rigorous literature review, aimed at illuminating the multidimensionality of the liquidity concept and advancing our understanding of the cash function within the context of its increasingly prominent role in corporate operations. The primary objective is to propose a taxonomy that endeavors to disentangle and delineate the diverse forms of liquidity, thereby facilitating future theoretical and empirical analyses with enhanced precision. The findings of this scholarly investigation shed light on the elusive nature of liquidity, distinguishing it from other conceptions that may be present in the financial literature.

Keywords: Liquidity, Market Liquidity, Asset Liquidity, Treasury, Funding Liquidity

JEL Classification: M40, M50.

Paper type: Theoretical Research