Lemons and Money Market
Copyright policy )Lemons and Money Market
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.
- University of Zurich Switzerland
Adverse selection; uniqueness of equilibrium; monotone com- parative statics; elasticity of supply; log-supermodularity; log-concavity; in- terbank markets, 10007 Department of Economics, IEW Institute for Empirical Research in Economics (former), Adverse selection, uniqueness of equilibrium, monotone comparative statics, elasticity of supply, log-supermodularity, log-concavity, interbank markets, 330 Economics, jel: jel:D82, jel: jel:G01, jel: jel:G21
Adverse selection; uniqueness of equilibrium; monotone com- parative statics; elasticity of supply; log-supermodularity; log-concavity; in- terbank markets, 10007 Department of Economics, IEW Institute for Empirical Research in Economics (former), Adverse selection, uniqueness of equilibrium, monotone comparative statics, elasticity of supply, log-supermodularity, log-concavity, interbank markets, 330 Economics, jel: jel:D82, jel: jel:G01, jel: jel:G21
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