  This paper analyzes repeated version of the bilateral trade model where the
independent payoff relevant private information of the buyer and the seller is
correlated across time. Using this setup it makes the following five
contributions. First, it derives necessary and sufficient conditions on the
primitives of the model as to when efficiency can be attained under ex post
budget balance and participation constraints. Second, in doing so, it
introduces an intermediate notion of budget balance called interim budget
balance that allows for the extension of liquidity but with participation
constraints for the issuing authority interpreted here as an intermediary.
Third, it pins down the class of all possible mechanisms that can implement the
efficient allocation with and without an intermediary. Fourth, it provides a
foundation for the role of an intermediary in a dynamic mechanism design model
under informational constraints. And, fifth, it argues for a careful
interpretation of the "folk proposition" that less information is better for
efficiency in dynamic mechanisms under ex post budget balance and observability
of transfers.
