Reputation and Persistence of Adverse Selection in Secondary Loan Markets

• 成果类型: Article
• 署名作者: Chari, V. V.; Shourideh, Ali; Zetlin-Jones, Ariel
• 署名单位: University of Minnesota System; University of Minnesota Twin Cities; Federal Reserve System - USA; Federal Reserve Bank - Minneapolis; University of Pennsylvania; Carnegie Mellon University
• 刊物名称: AMERICAN ECONOMIC REVIEW
• ISSN/ISSBN: 0002-8282
• DOI: 10.1257/aer.104.12.4027
• 发表日期: 2014
• 页码: 4027-4070
• 关键词: Incomplete information; monetary-policy; MODEL; liquidity; lemons; equilibrium; securities; bad

摘要

The volume of new issuances in secondary loan markets fluctuates over time and falls when collateral values fall. We develop a model with adverse selection and reputation that is consistent with such fluctuations. Adverse selection ensures that the volume of trade falls when collateral values fall. Without reputation, the equilibrium has separation, adverse selection is quickly resolved, and trade volume is independent of collateral value. With reputation, the equilibrium has pooling and adverse selection persists over time. The equilibrium is efficient unless collateral values are low and originators' reputational levels are low. We describe policies that can implement efficient outcomes.