Lemons and money markets

Christian Ewerhart and Patricia Feubli

No 455, IEW - Working Papers from Institute for Empirical Research in Economics - University of Zurich

Abstract: This 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.

Keywords: Adverse selection; uniqueness of equilibrium; monotone comparative statics; elasticity of supply; log-supermodularity; log-concavity; interbank markets (search for similar items in EconPapers)
JEL-codes: D82 G01 G21 (search for similar items in EconPapers)
Date: 2009-11
New Economics Papers: this item is included in nep-cta
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Related works:
Working Paper: Lemons and Money Market? (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:zur:iewwpx:455

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