Lemons and Money Market?

Christian Ewerhart and Patricia Feubli
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Patricia Feubli: University of Zurich

No 10-04, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: This paper identifies simple conditions for monotone compara- tive 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 com- parative statics; elasticity of supply; log-supermodularity; log-concavity; in- terbank markets (search for similar items in EconPapers)
JEL-codes: D82 G01 G21 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2010-01
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Related works:
Working Paper: Lemons and money markets (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1004

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