Liquidity Architectures and Production Arrangements

This chapter argues that provision of liquidity detached from the liquidity requirements arising at the sectoral and inter-sectoral levels may be responsible for tensions at the macro-level. This contribution outlines a theory of liquidity as coordinating mechanism in a system of interdependent activities arranged along the time dimension and investigates the alternative liquidity requirements that one may identify by decomposing the aggregate economy into a set of vertically integrated sectors or, alternatively, into a set of horizontally integrated industries. Liquidity crises and structural dynamics are shown to be conditions generating strains and stresses in the debt-credit configurations of a credit production economy, which may require ad hoc policy responses. The contribution concludes by discussing alternative liquidity policy scenarios that are associated with different approaches to the decomposition and aggregation of economic activities in the Eurozone.