If we lived in a world with perfect and complete markets as envisaged by Arrow and Debreu, liquidity problems would not exist. Everybody would be able to make fully contingent arrangements to insure against unanticipated short-term needs for funds. Well, the recent financial turmoil has painfully reminded us that financial markets do not match the theoretical ideal world of the “ArrowDebreu” model.
What do we then mean when we speak of liquidity? In general, we can distinguish between at least three types of liquidity 1 :  1  See also Roger Ferguson, Philipp Hartmann, Fabio Panetta and Richard Portes (2007), “International Financial Stability”, Ninth Geneva Report on the World Economy, pp. 9-10.