A Taxonomy of Liquidity

Abstract The term “liquidity” covers many concepts but is generally taken to refer to the ease of convertibility into money. The literature classifies this ease of convertibility as “market liquidity” to distinguish it from “funding liquidity,” which represents the ease of obtaining funding. Many other forms of liquidity can be identified that do not receive their own specific classification. A more granular taxonomy that clarifies and distinguishes each form would permit greater analytical precision when investigating empirical evidence. This paper offers such a taxonomy.