Arseneau, David M.; Rappoport W., David E.; … - In: Theoretical Economics 15 (2020) 4, pp. 1669-1712
We show that trade frictions in over‐the‐counter (OTC) markets result in inefficient private liquidity provision. We develop a dynamic model of market‐based financial intermediation with a two‐way interaction between primary credit markets and secondary OTC markets. Private allocations...