Lemons and money markets
AbstractThis paper identifies simple conditions for monotone comparative statics of a unique equilibrium in the Akerlof-Wilson model. Separate conditions apply to trade volume and price. Trade volume increases when supply becomes both stronger and more elastic. In contrast, price decreases when supply becomes both stronger and less elastic. An application to the interbank market suggests surprisingly specific measures to address elevated term rates and market breakdown.
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Bibliographic InfoPaper provided by Institute for Empirical Research in Economics - University of Zurich in its series IEW - Working Papers with number 455.
Date of creation: Nov 2009
Date of revision:
Adverse selection; uniqueness of equilibrium; monotone comparative statics; elasticity of supply; log-supermodularity; log-concavity; interbank markets;
Other versions of this item:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G01 - Financial Economics - - General - - - Financial Crises
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