This paper considers the efficiency of financial intermediation and the propagation of business cycle shocks in a model of long-term relationships between entrepreneurs and lenders lenders may be constrained in their short-run access to liquidity. When liquidity is low, relationships are subject...

This paper develops a macroeconomic model in which investable assets flow to entrepreneurs through long-term relationships with lenders. Low asset flows cause relationships to break up due to insufficient liquidity. Multiple Pareto ranked steady states emerge from complementarity between...

This paper considers the efficiency of financial intermediation and the propagation of business cycle shocks in a model of long-term relationships between entrepreneurs and lenders lenders may be constrained in their short-run access to liquidity. When liquidity is low, relationships are subject...