Essays on Middlemen, Liquidity, and Unemployment
- Author(s): Urias, Marshall
- Advisor(s): Rocheteau, Guillaume
- et al.
Chapter 1 develops an integrated theory of intermediation and payments in wholesale and retail goods markets. The model synthesizes the search-theoretic approach to intermedation with the New Monetarist approach to payments. I consider two margins of intermediation, inventory and entry, within pure credit and pure currency markets. In a pure credit economy, the equilibrium is generically inefficient due to an inventory holdup problem and search externalities. Improving the bargaining position of middlemen increases consumption and entry. In a pure currency economy, there is a two-sided holdup problem associated with middlemens' inventory choice and consumers' portfolio choice. This results in multiple steady state equilibria and a non-monotone response of consumption and entry to fundamentals. There exists a threshold nominal interest rate below which monetary policy is ineffective.
Chapter 2 explores how intermediation can affect the way in which firms engage in international trade and the subsequent macroeconomic implications on prices, profits, and intra-industry reallocation. Exporters must decide which markets to sell to and the mode of product delivery. Alongside the conventional option of direct export, this model introduces an additional indirect export channel: intermediation. Intermediation is modeled as a Pissarides (2000) matching market which is then embedded within a standard intraindustry model of trade
Chapter 3 explores the link between goods and labor markets in a New Monetarist model of liquidity. The framework integrates a model of money and credit into a Mortensen-Pissarides labor market in order to study the relationship between the availability of credit, firm entry, and unemployment. I show that there exists a non-monotone relationship between credit and unemployment even with a uniquely determined monetary equilibrium. Finally, I show that the modeler's choice of bargaining protocol can affect the qualitative relationship between unemployment and credit.