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RBA Glossary definition for liquidity

liquidity – The capacity to sell an asset quickly without significantly affecting the price of that asset. Liquidity is also sometimes used to refer to assets that are highly liquid.

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Data

10 Jul 2019 RDP 2019-06
Fiona Price, Benjamin Beckers and Gianni La Cava
Sources: ABS; Authors' calculations; HILDA Survey Release 17.0. In examining the drivers of any debt overhang effect, we use several measures for liquidity constraints. ... Based on this, we estimate that around 14 per cent of Australian households are
https://www.rba.gov.au/publications/rdp/2019/2019-06/data.html

The Effect of Mortgage Debt on Consumer Spending: Evidence from Household-level Data

1 Jul 2019 RDP 2019-06
Fiona Price, Benjamin Beckers and Gianni La Cava
provides information on their expectations for future employment and debt, their liquidity holdings and their risk preferences. ... Borrowing constraints. Liquidity constraints. Lagged LVR >80%. Hand-to-mouth. Behind on repayments.
https://www.rba.gov.au/publications/rdp/2019/2019-06/full.html

Why is There a Negative Effect of Debt on Spending?

10 Jul 2019 RDP 2019-06
Fiona Price, Benjamin Beckers and Gianni La Cava
Borrowing constraints. Liquidity constraints. Lagged LVR >80%. Hand-to-mouth. Behind on repayments. ... This provides further indirect evidence that liquidity (or cash flow) constraints are not the sole explanation for the debt overhang effect.
https://www.rba.gov.au/publications/rdp/2019/2019-06/why-is-there-a-negative-effect-of-debt-on-spending.html

Appendix B: Institutional Features of the Australian Mortgage Market

10 Jul 2019 RDP 2019-06
Fiona Price, Benjamin Beckers and Gianni La Cava
KVW (2014) outline a model to identify liquidity-constrained or ‘hand-to-mouth’ households. ... The main differences between offset accounts and redraw facilities are the degree of liquidity and the effect of withdrawals on home equity.
https://www.rba.gov.au/publications/rdp/2019/2019-06/appendix-b.html

Appendix A: Debt Overhang Model

10 Jul 2019 RDP 2019-06
Fiona Price, Benjamin Beckers and Gianni La Cava
L. 1. δ. φ. D. A. 0. The household may also face a liquidity (or cash flow) constraint in period 1:. ... and lower disposable income to meet the required repayments. (. δ. ). For a liquidity-constrained household, the consumption function is:. C.
https://www.rba.gov.au/publications/rdp/2019/2019-06/appendix-a.html

Conclusion

10 Jul 2019 RDP 2019-06
Fiona Price, Benjamin Beckers and Gianni La Cava
In contrast to previous literature, we find little evidence for borrowing and liquidity constraints or precautionary saving motives to be key drivers of the negative debt overhang effect.
https://www.rba.gov.au/publications/rdp/2019/2019-06/conclusion.html

References

10 Jul 2019 RDP 2019-06
Fiona Price, Benjamin Beckers and Gianni La Cava
Eggertsson GB and P Krugman (2012), ‘Debt, Deleveraging, and the Liquidity Trap: A Fisher-Minsky-Koo Approach’, The Quarterly Journal of Economics, 127(3), pp 1469–1513.
https://www.rba.gov.au/publications/rdp/2019/2019-06/references.html

Literature Survey and Our Contribution

10 Jul 2019 RDP 2019-06
Fiona Price, Benjamin Beckers and Gianni La Cava
The importance of borrowing and liquidity constraints as well as uncertainty for consumption has been brought to the fore during the GFC (Pistaferri 2016). ... To the extent that debt exacerbates borrowing or liquidity constraints or increases
https://www.rba.gov.au/publications/rdp/2019/2019-06/literature-survey-and-our-contribution.html

Introduction

10 Jul 2019 RDP 2019-06
Fiona Price, Benjamin Beckers and Gianni La Cava
provides information on their expectations for future employment and debt, their liquidity holdings and their risk preferences.
https://www.rba.gov.au/publications/rdp/2019/2019-06/introduction.html