Optimal Interventions in Markets with Adverse Selection

Thomas Philippon () and Vasiliki Skreta

American Economic Review, 2012, vol. 102, issue 1, 1-28

Abstract: We study the design of interventions to stabilize financial markets plagued by adverse selection. Our contribution is to analyze the information revealed by participation decisions. Taking part in a government program carries a stigma, and outside options are mechanism dependent. We show that the efficiency of an intervention can be assessed by its impact on the market interest rate. The presence of an outside market determines the nature of optimal interventions and the choice of financial instruments (debt guarantees in our model), but it does not affect implementation costs. (JEL D82, D86, G01, G20, G31)

Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (143)

Downloads: (external link)
http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.1.1 (application/pdf)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: Optimal Interventions in Markets with Adverse Selection (2011)
Working Paper: Optimal Interventions in Markets with Adverse Selection (2010)
Working Paper: Optimal Interventions in Markets with Adverse Selection (2010)
Working Paper: Optimal Interventions in Markets with Adverse Selection (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:102:y:2012:i:1:p:1-28

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().