Rocheteau, Guillaume; Rodriguez-Lopez, Jose Antonio - Department of Economics, University of California-Irvine - 2013
This paper develops a model of the public and private provision of liquidity and its relation to unemployment. We extend the Mortensen-Pissarides model of the labor market by adding an over-the-counter (OTC) market. Trades in the OTC market are collateralized with liquid assets, which are...