This paper examines the dynamics of liquidity in stock and Treasury bond markets over a period of more than 1,800 trading days. Using a vector autoregressive model, the authors document cross-market dynamics in liquidity, returns, volatility, and order flow. Key findings include: 1. **Cross-Market Dynamics**: Shocks to quoted spreads in one market affect spreads in both markets, and return volatility is a significant driver of liquidity. 2. **Correlation Between Liquidity and Volatility**: Innovations in stock and bond market liquidity and volatility are significantly correlated, suggesting common factors influence both markets. 3. **Monetary Policy Impact**: Monetary expansion increases equity market liquidity during financial crises, while unexpected changes in the federal funds rate lead to decreases in liquidity and increases in stock and bond volatility. 4. **Fund Flows**: Flows to the stock and government bond sectors play a crucial role in forecasting stock and bond liquidity. The study highlights the interplay between "macro" liquidity (money flows) and "micro" liquidity (transactions costs), providing insights into how liquidity can exhibit co-movement across asset classes and be driven by common influences.This paper examines the dynamics of liquidity in stock and Treasury bond markets over a period of more than 1,800 trading days. Using a vector autoregressive model, the authors document cross-market dynamics in liquidity, returns, volatility, and order flow. Key findings include: 1. **Cross-Market Dynamics**: Shocks to quoted spreads in one market affect spreads in both markets, and return volatility is a significant driver of liquidity. 2. **Correlation Between Liquidity and Volatility**: Innovations in stock and bond market liquidity and volatility are significantly correlated, suggesting common factors influence both markets. 3. **Monetary Policy Impact**: Monetary expansion increases equity market liquidity during financial crises, while unexpected changes in the federal funds rate lead to decreases in liquidity and increases in stock and bond volatility. 4. **Fund Flows**: Flows to the stock and government bond sectors play a crucial role in forecasting stock and bond liquidity. The study highlights the interplay between "macro" liquidity (money flows) and "micro" liquidity (transactions costs), providing insights into how liquidity can exhibit co-movement across asset classes and be driven by common influences.