Central counterparties (CCPs) have increasingly become a cornerstone of financial markets infrastructure. We present a model where CCPs are necessary to implement efficient trade when trades are time-critical, liquidity is limited and there is limited enforcement of trades. We then show that --...

This paper studies the long run effects of monetary policy in a micro-founded model with trading frictions and endogenous market segmentation. Agents must pay a fixed cost to participate in a centralized liquidity market. By endogenizing the participation decision, this model endogenizes the...